Finding Businesses for Sale
(The Circle of Sourcing)
Sourcing— There are probably two or three business for sale in your cell phone contact list right now! (But I wouldn’t start there:-)
Now that you’ve got this crazy idea to buy an existing business AND catapult your wealth and financial independence to the next level, where do you find businesses for sale?
Do I need a broker?
Do I need a realtor?
Is there a list?
The more refined your Investment Thesis is, or your deal criteria, the better you’ll get at finding not just any businesses for sale, but the right business to match your resources, your skill set and your situation. And the more you search for business for sale, the more refined your criteria will become.
The Circle of Sourcing.
But before you hop on that merry-go-round, let’s chat about the two different categories of businesses when it comes to sourcing.
SIDE BAR:
At some point you may you’re willing to buy any profitable business within your “price range”. We call that Sector Agnostic. Being sector agnostic may be okay for more experienced buyers, but in my opinion, it’s better to have specific deal criteria nailed down. This will lead to better conversations and more introductions.
So, there are on-market deals and there are off-market deals.
On-market deals are those businesses that are actively looking for a buyer. They are probably listed with a broker, similar to the way we list our homes with a realtor. An on-market company may be working with an investment banker or it could be a FSBO-(pronounced fiz-boe) for sale by owner.
An off-market company is not actively looking for a buyer. They may not even realize their business can be sold.
There are pros and cons to both types of deals, and I did a quick comparison below.
On-Market
More organized data and financial documents.
Have someone guiding them through the process.
Have had conversations about the potential value.
Easy to find information online and through various publications and email services.
May be listed at inflated price.
Brokers often act as gatekeepers or barriers to getting deals done.
Off-Market
No data room or organization of information needed to assess the business.
The buyer has to guide them through the first thoughts of selling.
They have no idea of the value.
They may be slow to respond to questions and information requests because they are also running a business.
There are different schools of thought with on-market deals vs off-market deals, but I would recommend beginning buyers stick with on-market, at least until they wade into the lake a bit. As with all new and worthwhile endeavors, this takes a lot of practice and it’s easier to get the reps in with businesses that are actively looking for buyers, companies that are listed for sale. As your Circle of Sourcing spins a little faster, and you start to get your bearings in the fascinating world of business buying, you’ll feel much more comfortable wandering off the path.
Everything in life now starts with a Google search, right? Start with websites. Some of these sites are more vetted than others, and therefore may provide “better” information and listings, but the point is to just start looking, for now:-)
Some of these sites are for brick-and-mortar shops while some cater to online businesses.
BizBuySell
BusinessesforSale
LaunchVector
EmpireFlippers
Acquire
Other ways to find business for sale include:
Current contacts in your cell phone.
At networking meetings.
Industry publications and events.
Industry specific Facebook groups.
Through professionals such as accountants and attorneys.
On your chore list (Companies you are already doing business with.)
Commercial realtors.
Bankers.
Business brokers.
Start with BizBuySell.com because it’s so easy, and they have bazillions of listings. I often refer to this site as the Tinder of business buying, swipe left, swipe right, but it’s a perfect first step. You can filter your search in lots of ways, including your own town or state, but start wide and see what’s out there. Note the information that’s shared.
Is real estate included?
How about inventory?
Are they leasing their space?
How many employees do they have?
How does the asking price compare to the revenue, to the cash flow?
This should get you plenty of “activity”. As discussed on a due diligence call I had yesterday, activity is great in the beginning, but at some point, you will just want to buy something. That’s when you know it’s time to narrow things down, if you haven’t already, and focus more on companies that check your specific boxes. In the meantime, window shop, imagine owning these businesses and start dreaming.
Next Step: Elevator Pitch
I think we all know what an elevator pitch is, but have you told anyone you’re in the market to buy a business? It’s time to come up with your one liner. And it doesn’t have to be specific, unless you have your Investment Thesis dialed in. But the next time someone asks you what you do, or what you’ve been up to, tell them you’re looking for a business to buy. If they want more details, feel free to say you’re still narrowing that down, but you’re open to ideas and introductions. Like I said, there are probably a few businesses for sale in your cell phone, with people you already know.
Start swiping your way through…
the Circle of Sourcing.
