The demand to buy businesses is rising, as it does during every down cycle in the economy. Layoffs and stalled careers lead people to look at giving up being an employee and instead owning their own businesses. But it’s tough, because the inventory level of good, stable businesses that are for sale isn’t that impressive.
One way to step ahead of the line is to buy a business that isn’t for sale.
In my last post I talked about how to find a mid-sized business. In this post I’ll describe how to engage with the owner of a small, regional business that has not yet listed his business for sale.
The key to finding a business that isn’t for sale is marketing yourself to current business owners. First, create a marketing package for yourself. Build a “buyer profile” (don’t just re-use a resume), and prepare a financial statement that you can share at the appropriate time. If you can’t prepare professional, flashy material then hire someone. Because I do mean the key is marketing. You need to create an immediate impression that you can buy and run the business. If you need financing, go see an SBA lender and see if you can get pre-approved (hint: it helps greatly in this market if you have experience in the type of business you are looking for – the banks like that).
By the way, it is common (and a basic instinct) for buyers to withhold their financial information until much later in the process. Don’t do it. This is an owner that hasn’t yet made up his/her mind to sell. You want to show them that they found an easy exit and that you can do the deal. Of course, you don’t have to show them everything, but enough that they would feel comfortable you have the resources.
Then approach business owners. You can use a business broker for this because they usually have subscriptions to databases and mailing capability, but you may have to look around a bit because most do “sell-side” only. Expect to pay them for the effort; this isn’t commission-only type of work. Or you can do it yourself using zapdata.com or similar database. Whatever you do, please don’t send letters that say, “We have a buyer for your business”. Business owners get a few of these a week and have learned there is no such person and only a ploy by business brokers. You have to get more personal with at least a profile, if not your name. Then do a low-key follow up call merely asking if they received your letter.
What you are trying to do is find an owner that has been thinking about selling, but does not have any specific plan (studies have shown that over 50% of business owners do not have an exit plan). I know from talking to many owners that often they think about selling for years before doing anything. You are not trying to pester owners or convince them to sell, you are hoping you can get in front of them at the right time.
Once you engage them, it is useful to have a business broker involved. If you have gotten this far by yourself, you can usually negotiate a discount with a broker for bringing him both a willing seller and a willing buyer.