A good rule-of-thumb is that you will need to have at least 20 percent of the purchase price on hand as down payment. Beyond the money, have a few good professional advisors. When you purchase a business, you inherit suppliers and other service providers, but it is in your best interest to have your own personal accountants and business attorneys to help you navigate the purchase process.
The national average is approximately six months from the decision to sell to the closing of the deal. The actual timing can vary based on a number of factors including the deal structure, asking price, the local market and even the time of year. One of the main factors that determine how quickly your business will sell is simply the ability to find a qualified buyer.
Ideally, the best time to sell your business is when sales and profits are up and financing is available for buyers. However, determining the best time to sell a business is based on more than just profit potential. Many business owners decide to sell when they find other opportunities and commitments to invest their time and resources in. Others need to sell because of health or financial issues.
The value of your business will be based on several factors including the market value of assets, earning potential, cash flow, and return on investment. Other considerations include the terms and structure of the deal. While value consists of many factors, the most influential is earnings, generally considered before taxes, interest, depreciation, and amortization.
The only way you will know you’ve found the right one is if you’ve looked at multiple that weren’t. After exploring a few options, you will get a feel for how businesses are presented to the market and start to recognize the factors you like to see in prospective acquisitions. Your personal checklist builds with each business you look at and is what will help you know when you’ve found a business that is a perfect fit for you.
Consider what area (state, town, etc.) you want your business to be located in. Determine how much cash flow the business will need to have in order to cover your debt service and living expenses. Think about the industry and what experience you do or don’t have. Finally, never forget about price. Can you actually afford the business you want to buy?
