In this post I’m going to go over the biggest obstacles to buying a business. Any business, big or small, not just bigger deals in sizable buyouts. Now there are many reasons why buyers and entrepreneurs self destruct as they go through the business buying process. So I am going to cover the most important of those reasons.
Not Mapping Strategy Out. The first and foremost of any of those obstacles is the failure of the buyer to map things out in advance. What does this mean? When it comes to buying a business you must have your head in the game. You need to understand the key compliments of how you will achieve the desired result. The desired result, of course, is to acquire a business. Mapping this out is all about pushing the right buttons to achieve the goal. So certain things have to be considered ahead of time. See the deal process map in the free stuff for a start.
For example, you need to have an idea of the size of company you will buy. Indeed you will not be fully aware of all the nuances but at least you’ll have an idea. Beyond this you should know what your deal criteria is. You should have an idea of the industry you will target. You should have an idea of the location you will target.
You’ll also want to have an idea of what your team will look like. That is to say who will you use for legal, accounting, and finance? And what about brokers. Where will you get your deal flow? Here is a bit of a checklist as to what things to consider when making your game plan.
- Deal Flow – decide how and from where deal flow will be developed.
- Deal Criteria – decide what your preferred deal will look like
- Taking stock of your buying power, what money will you need
- Decide your image, company name, structure and team members
- Develop a timeline to multitask the components so that you can move towards closing
2. Not Networking From the Beginning. When you are done mapping things out you need to know where you’ll be doing your networking. Failure to do networking is a very big obstacle to buying a business. At some point during the process you will need legal assistance, lenders, investors possibly, and other professionals that will get you through the process. Not to mention brokers, that will be needed as well.
3. Doing it all yourself. When it comes to buying a business generally speaking you can’t do it all yourself. I say generally speaking because there are many solopreneurs out there that will indeed do everything themselves and prove the exception to the rule. You will need advisers and people on your team, and you need to understand when things are getting beyond your control. This does not mean you go broke hiring people before your deal is done. There is a time and place to use the services of an accountant and a lawyer, after you have a signed deal and it is near completion. The advice of a good broker can be useful as well. Not all of these professionals are competent and not all of them will share, so you need to pick your friends carefully. Lawyers can be skilled in one area and utterly ignorant of business transactions.
You may well need partners in your transaction. There is nothing wrong with having a partner in your deal. It happens all the time. If you believe that you do not what to share the wealth with a partner, also believe that one may help get your deal done and you can always be sole owner later. This process goes hand in hand with networking because as you network you’ll get to know more people that potentially can join your team. As the modern day deal business slides into virtual reality, your team can be as expensive as you need it to be without costing you much up front. Keep in touch with your networking partners and bury the expensive fees into the next deal. No need for offices, you can have a world at your fingertips, run a deal shop and never have a payroll.
4. Fear, intimidation and pulling the trigger. Fear has many ways to interfere with your deal. It can come in many forms. It can stop you from moving forward because of self doubt. You may think you’ll never close a deal and stop working towards the goal. You may feel that you are unqualified to either run a business or put a deal together. And self doubt where you’re not sure what you have the background or education for putting a deal together – and people such as brokers or sellers let you know it. Or you may feel overwhelmed when getting an offer signed because you feel that the deal you are working on is over your head. You may be scare away from pulling the trigger. I write training materials for overcoming this but it is a very real problem that all small buyers face: buyer remorse. There are so many ways you can talk yourself out of a deal it is not funny. This is a head game that must be overcome with the right mindset. Work on yourself. Soak up some personal development tools and move forward without looking back.
5. Not having enough money. The problem with not having enough money is that it sends a negative signal to your brain. You will kid yourself into thinking you can own the whole thing or worse that you have no way of closing a deal. Most of us do not have enough money to buy a big company, or even a small company, and if we did we would not want to part with it. This is why there are such things as investors. This is why there such things as partners. This is why there are lenders. Realize that plenty of millionaires started out with no money. In order for us to get over these hurdles you need to consider all factors in putting a deal together. You need to figure out where money can be gotten. Yes you can do a deal with very little money but it could take you quite awhile to find the perfect opportunity and pull it together. You may not have that much a of luxury when it comes to time. We all need a paycheck now not later. When you get a deal together that is almost within your means, but not quite, it probably can be done as long as you scramble, persist and push to put the remaining pieces together.
6. Not having the foundation. You need to have enough of an education to be comfortable in putting a deal together. This means understanding the basics. Knowing what the goals are, understanding the numbers, and developing the experience level needed to have the confidence to go forward. These are all components that are the basis of your foundation. Visit Sellers, have lunch with lenders, travel to businesses, network with people places and events. All these things will add to your experience level and your foundation. Educate yourself while you are getting that experience.
A final comment on all these obstacles is that they can all be overcome. Self confidence is developed over time and with enough experience to provide you with the tools to get things done. When you have these tools, things will get more interesting fun and you will have much more staying power to get to the finish line.
