Buyers who remove doubt win deals.
Sellers are looking for certainty of close.
Brokers are looking for certainty of close.
If you do not present yourself as a serious party, sellers are going to push you to the side. Brokers are certainly not going to take you seriously and push your LOI to the top of the table.
Instilling confidence in the sellers and their team is critical.
Sellers do not care if you are new.
They do not care if you have bought businesses before.
Sellers are looking for certainty.
If you can show yourself as a prepared buyer and credible, you have a better chance of winning the deal and ultimately closing on that business.
Confidence and preparedness matter.
Everyone I have seen reach the closing table has confidence in their own abilities and shows that confidence to sellers and brokers.
Preparation starts before the first conversation.
Be prepared to show up with questions.
If you come across a business listing you like, list out two or three questions you are going to ask ahead of time.
Do some homework on the company.
Learn about the industry.
Successful buyers focus on a few industries and become a knowledge library of how the business works.
They learn key terms and jargon so they can talk the language of the business owner.
If you do not understand the industry, it is very hard to communicate questions about the business.
Sellers may have doubt if you are unable to articulate questions about their business.
Learning the lingo and learning the jargon allows you to align yourself with sellers and remove doubt.
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Prepared buyers act credible.
Ways you can prepare include:
• Obtaining an SBA pre qualification letter
• Preparing a personal financial statement
• Showing capital for the down payment
SBA loans typically require a ten percent down payment.
For example:
• A one million dollar SBA loan may require one hundred thousand dollars as a down payment.
Credibility also comes from behavior.
• Respond in a timely manner
• Act in a professional environment
• Be disciplined and act with integrity
You also want to show sellers that you value their employees and what they have built.
You are buying to build and carry on this legacy going forward.
One of the most common pitfalls is ignoring financial diligence findings early.
For example:
• A business broker presents net income as one million dollars
• Early in due diligence you realize the earnings are actually five hundred thousand
Some buyers try to push this off and keep moving through due diligence.
These are red flags and need to be addressed early.
Financial data in SIMs and marketing materials is largely unverified.
This is because those statements and slide decks are prepared by a business broker.
They must be verified and rerun by an accountant or quality of earnings team.
The financial statements should come directly from the accounting system.
Comparing the accounting system to the SIM often reveals due diligence findings early.
Addressing these findings early saves time and money.
You can find this and other content on my YouTube channel, including shorts, long-form videos, and guest discussions focused on buying small businesses and improving operations.
If you want to reach out on LinkedIn or X, share feedback, or suggest topics, feedback is a gift.
Poor communication is another reason deals stall.
Deals stall and die because communication is lacking throughout the process.
Keeping a constant stream of communication directly correlates with your probability of closing.
During due diligence:
• Keep contact with owners on a continual basis
• Keep the deal moving
• Keep communication consistent
Some buyers even travel weekly during due diligence to keep the deal moving.
It might sound crazy.
But communication is key during due diligence.
When you first speak with a seller, keep the conversation informal and casual.
Build rapport first.
Then ask open ended questions such as:
• Why are you selling the business?
• What has led to the success of your business?
• How has the business performed in the last few years?
Operational questions are also valuable:
• Walk me through a typical sale
• Walk me through how you pay vendors
• How do you pay people from start to finish?
• What was the last bill you paid?
These questions help you understand:
• How the business makes money
• Who is involved in revenue generating activities
• Who tracks receivables
• Who collects money
• How money is deposited and tracked in the financial system
For those just starting their search:
Stop planning and start doing.
Do not wait for the perfect plan.
Instead:
• Make the first call
• Go to an acquisition conference
• Go to a local meetup for acquisition entrepreneurs
• Meet brokers, owners, and other people in the space
Tap into your local networks and start meeting people.
Deal reps and the number of deals you look at will lead you to understand what works well for you.
There is not a one size fits all way to find a business and close on it.
Learn strategies and choose the one that fits your personality.
Buying a business follows a simple process:
Platforms like Searchfunder and BizBuySell are good places to start.
• Searchfunder is a community
• BizBuySell is a business listing site
Both are great resources to start and learn more.
A typical LOI timeline is about ninety days.
Once a letter of intent is signed:
• You receive an exclusivity period
• You conduct financial diligence
• You conduct legal diligence
• You secure an SBA or bank loan
SBA loans typically take seventy to seventy five days to secure.
Because of this, it is important to start bank underwriting early.
Financial diligence should also begin early.
The first step is verifying that financial data in the marketing materials ties back to the accounting system.
If there are differences in net income, revenues, or expenses, those differences need to be addressed immediately.
Before starting your search, create your business buy box.
Your buy box is the criteria for the business you want to buy.
It typically includes three questions:
• How will I pay for it?
• Who is running the business?
• What type of business do I want to buy?
You may also ask:
• Are there industries you get excited about?
• Are there industries you do not want to buy?
Write your buy box on a sticky note and stick it to your computer.
This helps you stay disciplined and focus on businesses that meet your criteria.
Many buyers finance acquisitions through SBA loans.
The SBA 7A loan is one of the most popular options.
These loans:
• Are backed by the government
• Require a personal guarantee
• Are commonly used to buy small businesses
Other options include:
• Private credit
• Private loans
• Seller financing
• Traditional financing
Each option has pros and cons.
Buyers should review these options and choose the one that fits their criteria.
Buying a business requires preparation, communication, and credibility.
Sellers want certainty of close.
Prepared buyers who remove doubt win deals.
Stop planning.
Start doing.
Make the first call and start your search.
Each deal, each conversation, and each experience builds the confidence needed to reach the closing table.
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