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Four Warning Signs You Aren’t Ready to Buy a Business (“it takes one to know one”)

Business brokers always hear from people who say they are interested in buying a business. 我们喜欢这些电话, 毕竟, we get paid when someone buys a business, so access to willing business buyers is a good thing, 正确的? Well, not really, because most of the time these conversations are an utter waste of time.

This doesn’t mean the person expressing interest in buying a business isn’t serious about buying a business. While there are indeed people who shop for sport, for the most part business brokers waste time with those who actually think they are ready to buy a business. Simply said, most buyers think they are ready to buy, but they aren’t. Having experienced scores (maybe hundreds) of conversations like this has led me to identify four warning signs when you aren’t really interested in buying a business:

1. You aren’t honest about how much money you can spend. I will ask a prospective buyer how much money he/she has to invest, and every time (and I mean every time) that prospective buyer will tell me the amount of cash they have PLUS an amount they think they can get from friends and family. I always hear the words “I have X amount but I have an investor who can go up to X million more.但你猜怎么着? That X million more never materializes, so most people spin their wheels looking at businesses they can never afford to buy.
2. You don’t involve your spouse in the process. Anyone who has owned a small business knows they call it a “family business” for a reason. If you show up to look at a business without actively involving your spouse, 你在为运动而购物. A smart business broker can smell this, especially if the business value is $1 million or less.
3. 你不问商业模式. Three minutes into a meeting with a prospective buyer, I can tell if the prospect is a serious buyer. The serious buyer wants to know how the company makes money, which is a different question from asking to see the financial statements. If you don’t understand the difference, don’t think about buying a business.
4. 你看不到机会. Most business shoppers are like fantasy baseball players, 他们认为自己知道游戏规则, but analyzing stats is very different from playing the game. The proliferation of business-for-sale web sites has not helped because they make the business evaluation process overly quantitative. A not-real buyer will decide what valuation metric they think is doable (e.g. 3X trailing EBITDA), then everything rests on finding a deal at or below that metric. 相反, the real buyer doesn’t care so much about initial valuation; sure, 没有人愿意为一项业务支付过高的价格, but a smart business buyer knows that a good business buy is way more than just price. A great opportunity over-priced is better than a so-so opportunity fairly priced. Here’s the deal, smart buyers buy on opportunity, not on price. 当然, the best deal is the great opportunity that is under-priced, but if you are only looking for those very rare diamonds in the rough, 你永远也成不了企业主.

It might be worth pointing out that I speak with great passion on this topic for two reasons. First, I get these kinds of calls almost daily. Second, I have made every one of these mistakes myself. As the old saying goes “it takes one to know one.”

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吉姆Cumbee established 田纳西河谷集团 to help business owners fulfill their dreams for life after business ownership. It’s a mission that his 30+ year career history had prepared him well for—in addition to being an attorney, transition mediator and business broker, 吉姆是一个买家, 卖方, 和企业家. His broad range of experience gives him unique insight into how business buyers and 卖方s can achieve their goals.

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