What are Your Odds of Buying a Business in Canada?
When meeting potential business buyers in my office, I usually state upfront that unfortunately the odds are against them. I do this for the purpose of discouraging the "tire kickers" who don't have the right attitude to be able to go through the whole business purchase process and complete a transaction.
Statistics have shown that in the U.S. more than 90% of potential business buyers actively looking to purchase a business never complete a transaction. These individuals waste their own time and money, the seller's time, and the broker's time and energy.
The following suggestions will help increase the odds for potential business buyers to complete a transaction in a reasonable time period.
- Do an introspective analysis about yourself, your goals, and your readiness to become an entrepreneur. Some people are better off having a job and collecting a paycheck. There is nothing wrong with that as long as you recognize it.
- Make sure that your finances are ready. You need money to buy a business and Canadian banks very rarely finance the purchase of small businesses. Even when they do, they frequently have tough criteria that eliminate some of the best opportunities available.
- Use the right professional advisors and use them wisely. Lawyers and accountants are necessary to purchase a business of a decent size, but don't rely on them to encourage you to pursue a transaction because they will probably advice against it. They are conservative by nature and their role is more about showing you the possible downsides rather than the upsides of the transaction. You should listen carefully to their analysis of the risks involved, but you should make your own decision about whether you are willing to take such a risk or not. Most buyers who hide behind their advisors never complete a deal.
- Be patient and tolerant of the seller's emotional state. Business sellers identify themselves with their businesses, which are "their babies." They can become extremely emotional. They can change their minds about the whole idea of selling the business or about dealing with you as a buyer. Try to establish an excellent relationship with the seller from the beginning. If the seller likes you personally, the deal is on the right track. Don't criticize the business or the seller as a way of reducing the asking price. On the contrary, you should praise the seller's accomplishments. In general, Business Brokers know how to deal with sellers' emotions, so listen to their advice. A good relationship with the seller will also help you in the transition period when you need all the tips and tricks the seller is willing to teach you.
- Focus your search for the right business. Business sellers want to know why you are interested in their particular business. If you are jumping from one opportunity to another and show a lack of focus, sellers with not take you seriously and will disqualify you. While it is advisable that you investigate more than one business before making a purchase, looking at too many businesses will simply increase your indecision.
- Finally, do not tell all your friends and acquaintances that you are buying a business and do not ask for their opinions about what you should do. Most people are not entrepreneurs; they will not make the jump and buy or start a business. So most people will discourage you from making the jump yourself. It is very easy to justify why an opportunity might be a bad opportunity. This rationalization is a simple way of avoiding making tough decisions.
If you are ready to avoid the pitfalls that plague most potential buyers, then you are probably among the 10% who do buy businesses.