This article are provided for information purposes only, and are not intended as legal advice.


When is a good time to buy a business?

September 2nd, 2009

Anytime is the best time to buy a business.  It is rare that the first business that you look at will be the business that you buy.  Many business investors do not realize that it takes time and effort to find a business and it can be a frustrating exercise.  Most people want to purchase a business today and do not want to wait.  If you want to purchase a house, you can find lots available, you need to pick the price range, then the neighbourhood, then you look to find out what houses are available.  Sooner or later, a house will come up for sale in the neighbourhood that you are looking for. 

 

When you are looking at a business, many first time buyers do not know what business that they want.  They may say that  I will look in the west side of the city that they are living in.  You cannot define it to I want to buy a business on this street.  Many people have to find out what businesses are available for sale before they know what they are looking for.  If you have never owned a business before, you really will be surprised how many types of businesses there are out there.  You may know that you want a retail store and it needs to be located in a mall or a shopping centre etc.  If you are looking for a distributor or manufacturer, what type are you looking for?  If you are looking for someone who sells widgets, what happens if you find one that sells widgets and another product, what happens if it does not sell widgets but to the same customers who buy widgets?  There are many opportunities out there and most people do not realize that businesses out there provide those services. 

 

To show how complicated businesses can be, let’s look at a sign hanging from a retail store advertising a product or a price.  There was one group or company which designed the ad, one who printed the ad, one who sold the point of sale gadgets to hold the sign to the ceiling (yes, there are businesses who only do this) and there is the installer who hangs the poster or sign.  Did you think that one company did everything?  There could have been 4 or 5 companies involved in that sign.  If you wanted to buy a company involved with signs, which one would you like, did you know you had a choice?  Many people when they start to look for a business are surprised of the choices that are available.  As a result, when they find a business, they have to determine is this the right business for themselves.   How do you know it is the right business?  Do you wait to see if you can find another business and hope that one the first one is still available when you are ready to buy?

 

It can take up to 12 months to find a business and some people spend longer looking for the right business.  Why does it take so long?  If you are lucky, you will find a business quickly but if you are not, it could take months and months to find a business.  Then you start researching the business that you found, spend time creating a letter of interest, that could take 2 weeks to negotiate, then 2 weeks to do due diligence and  then one to two months to get the legal documents completed and executed.  All that can total 12 months,


Filed under: Buying a business — Gary Landa @ 6:39 pm


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