THE GUIDE TO BUYING A BUSINESS THE PLAYBOOK BUILT FOR BUSINESS OWNERS AND ENTREPRENEURS Your Business Matters AlexanderAbramson.com • (407) 649-7777 February 2019
As you may know, we recently published our new book, The Guide to Buying a Business . For those of you who’ve already secured your free copy, congratulations! For those of you who haven’t, there’s still time!
To whet your palette a bit, below is an excerpt from the introduction. If you’re intrigued and want to know more, you can snag your own copy at AlexanderAbramson.com/GBaB.
TWO TYPES OF BUYERS
startup, with many of the problems and concerns that we laid out earlier.
Up to this point I’ve been speaking to a certain type of business buyer, one who’s looking to make an investment for the future. Let’s call this an investment buyer. This entrepreneur wants to buy a business for its income stream and potential for future growth. But I certainly don’t want to make it seem like the only reason to purchase a business is to make an initial venture into the business world. Buying a business can also be a vital part of a strategic plan to grow an existing business. We’ll call this entrepreneur a strategic buyer. In this situation, he purchases a business for access to a component of the company that can be used to improve or expand his existing business at a lower cost than organic growth through internally generated sales or expansion. Consider a company that sells printers, let’s call it Sabre, and it wants to sell its products into a new market. It could try to sell directly to that market. But its sales would be limited by the experience and credibility of its sales team in that market and by its understanding of the market’s needs and terminology. It would, in essence, be a Sabre and Dunder Mifflin
If, on the other hand, Sabre decided to buy a paper company, let’s call it Dunder Mifflin, which already served the newmarket, it would acquire Dunder Mifflin’s customer base and products or services, as well as an experienced sales force with a reputation and staff experienced with the newmarket. Purchasing Dunder Mifflin is a strategic acquisition because, in addition to the cash flow coming from Dunder Mifflin’s established operations, Sabre can grow its original business by piggy-backing on Dunder Mifflin’s existing distribution network and by selling more of its printers through the new sales channels. It may also be able to improve Dunder Mifflin’s profits by cutting costs from duplicated back office operations.
Many (if not most) small businesses for sale are over-priced. Some have serious operational problems and are on the brink of closing. And some business owners are downright dishonest. The best way to guard against these issues is to educate yourself on the process of buying a business. Then, you should engage professional advisors to investigate the business with you and to prepare all of the proper documentation. So, you’ve got to be diligent. You’ve got to understand the buying process, know the risks and how to protect yourself from them, and do your homework on the business. You skip these steps at your own peril.
IT’S NOT ALL RAINBOWS AND BUTTERFLIES
Want to read the rest of this chapter and the other 11 chapters? Go to AlexanderAbramson.com/GBaB to request your free copy of the book!
I don’t want you to think for a moment that buying a business is a cake walk. Whether you are an investment buyer or a strategic buyer, buying a business requires focus and caution. You don’t want to take on the seller’s problems or, worse, pay for something that’s going to be out of business in a fewmonths.
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