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Targeting a business for sale

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You may have decided that it makes sense to buy a business, since this is often an approach that can give you a shortcut to success.

You may see it as being a strategy that involves less risk than starting your own business from scratch.

But how should you go about targeting existing enterprises? To begin with, you'll undoubtedly want to consider the key factors that will influence your decision. You might know, for example, that you want to buy a hotel. But what type of hotel would you prefer?

You may be thinking about a small, stylish place in the middle of a city. Alternatively, there could be a thought that it would be great to own a place in the country.

Your budget will also have an impact on your possibilities and should help you to narrow down your list of potential options at the outset. It is worth considering, however, that the initial asking price could be very different to the final sale price for any business.

Location may also be critical to your requirements. Are you prepared to move from your current home town? If so, are there limits on how far you would be happy to move?

With your basic requirements in mind, it's time for you to examine specific businesses that can help you to meet your objectives.

Finding a business

There are two main ways of finding a business to buy. You can either target those that are known to be on the market, or you can approach the owners of businesses that are not actively being sold at the present time.

You'll find that US trade magazines will often include adverts pertaining to businesses that are up for sale. There are also a range of websites that are specifically aimed at advertising US businesses for sale.

You'll find that US trade magazines will often include adverts pertaining to businesses that are up for sale. There are also a range of websites that are specifically aimed at advertising US businesses for sale. These can provide a good starting point, although the public nature of such information can mean that you will face stiff competition to secure your perfect business purchase.

The alternative is to approach the owners of businesses that are not currently being advertised. The reality is that every business has its price. Just because the business does not appear to be for sale, this shouldn't imply that it can't be bought.

You may wish to employ an intermediary to represent you, when making approaches to business owners. By making use of a business broker, for example, you'll find that you have access to their experience and expertise.

Don't forget, however, that such intermediaries will charge a fee for their services. You need to make sure that you don't pay too much for professional services, particularly if you're looking to buy a relatively small business.

Initial due diligence

The due diligence process involves ensuring that the business is as described. The formal process would usually be carried out by accountants or lawyers.

Once you have identified a shortlist of 5 or 6 target businesses, you may wish to carry out your own, DIY due diligence process. You probably won't want to hire professionals at this stage, since the cost of carrying out the process on every business within the shortlist will be prohibitively high.

Instead, you can gain access to the accounts and contracts of the existing businesses. As you would expect, you will be asked to sign a confidentiality agreement, since the business owners won't wish to see such information placed within the public domain.

You may also want to carry out test purchases of products and services. Your aim is to find out all that you can about the businesses, the services that are offered and how they are viewed by customers.

As a result of your DIY approach, you should be able to narrow your shortlist down, until you have a first choice target and a back-up. You can then hire accountants and lawyers to carry out the formal due diligence process on those businesses.

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