Have you ever scrolled endlessly through a website with the intention to purchase something but, at the same time, completely uncertain of what to buy? How many times has an unplanned purchase led you to become the owner of a subpar product: an item that ended up costing you more money and time than it was worth, or that product that didn’t perform at all the way you had hoped it would?
If you had taken the time to research, read reviews, get advice and set criteria for each purchase made then, maybe, you wouldn’t have that pile of useless trinkets in your junk closet. Instead, you’d have a collection of well-performing items that you use daily—objects which give you confidence that your investments were worthwhile.
Buying a business is similar to buying a product; except, buying a business is likely going to be the most important purchase of your life. If you happen to buy the wrong business, what’s at stake is a lot more than the loss of a few bills and the addition of a new toy in the catch-all drawer. Buying the wrong business is a grave risk and likely detrimental for both your financial and personal wellbeing.
This is why focussing on your search to find the right business to buy is crucial for the success of your acquisition.
The Infamous Search
If you’ve looked into the business buying process, or know someone who has gone through the process before, then you’ve probably heard the anecdote that searching for a business to buy is the most taxing and strenuous part of the acquisition process.
For many buyers, this anecdote rings true. Village Wellth can testify to this. So much so that we’ve dedicated two previous articles to discussing the infamous search process. The first article describes the main reasons why most buyers fail to move past the search phase, and the second explains how to define your criteria to find the right business to buy and acquire successfully.
Searching for a business to buy is an undeniable challenge, especially for the independent buyer. Acquisition entrepreneur and M&A advisor, Walker Deibel, states
Even with a developed search plan and a detailed set of criteria in place, the process of finding a target business can take people, on average, anywhere from 18 to 24 months. This important purchase requires months of careful research, planning and execution.
The timeline alone is often a cause for a buyer’s search frustration. To boot, buyer frustration skyrockets when a buyer is unsure of how to search for their target effectively. Most buyers will enter into the search process naively unaware of what it truly takes to find the ideal target. Deibel articulates that “the high level of confidentiality, inexperienced buyers and sellers and the fragmented nature of listings and transacting businesses has created a lot of opacity around navigating the landscape.”
As a buyer, you might find yourself battling the reality that you know the right target is out there but you just can’t seem to find it. You spend your days searching endlessly for a business to buy, yet there’s no possibility to grasp and hold any leads.
If you ever find yourself in this situation, you may want to ask yourself these things:
- How active is my search? What steps am I taking to find a target? Am I scrolling aimlessly through marketplaces and business-for-sale websites? Has my search process become a habit and hobby, or is it an active job and time commitment?
- Have I invested money into my search? Have I decided to hire a broker, or multiple brokers, to help find deal flow? Have I committed money and time to get advice and information from acquisition advisors? Have I put money into resources to learn about the buying process?
- Do I truly know what I’m looking for when I search? Have I refined my search criteria too much or not enough? Do I have a clear idea of my professional objectives? Do I know what I’m willing or not willing to risk? Do I have a grasp on what I can afford or what kind of opportunity is viable for me and my lifestyle?
In order to conduct an effective search—the search that will lead you to your best target opportunity—you must seek opportunities actively by investing time and money into your quest. Likewise, you need to understand what kind of business is affordable and desirable for you, so you can clearly express to advisors, sellers and lenders what you’re looking to gain from an acquisition opportunity.
How to Search Effectively
What’s the secret? How do you actively and effectively search for a business to buy as an independent buyer?
Unfortunately, there isn’t an exact secret sauce or perfect formula.
Most websites and open-access articles will lead you astray and suggest that you do one or both of these two things:
- Look at deal flow online available through broker websites or listing databases.
- Reach out to your network of professionals to find leads to deal flow.
Searching for a target business through deal flow websites is similar to searching for a job online via databases like Indeed or Monster. You end up spending hours passively submitting your resume to countless postings only to hear back from one recruiter about a job that you realize wasn’t the right fit after all.
Ultimately, performing these tasks successfully is easier said than done—passive performance is not going to get you to your goal of finding your target.
The reality is that most valuable business opportunities are either not listed on business for sale marketplaces, or not on the open market at all. If you have searched through deal flow websites, you know how difficult it is to formulate a lead when you’re an independent, first-time buyer working without representation.
If it’s your first time purchasing a business, it’s unlikely that your pre-existing professional network is as advanced as it needs to be to get access to adequate deal flow.
Contacting advisors that you already know—like family lawyers, real estate agents and financial planners—can certainly help put you in contact with the right professionals. For example your realtor may have information about a local business broker, or your financial advisor may have input on a great corporate CPA. However, reaching out to your generic professional community is not your end all be all move.
The first step in performing an active, comprehensive search is to build a strong network of professional advisors who have expertise and experience with the process of acquisition and in the industry space that your target business serves. This team will be your potion—the ingredients that formulate the sauce which will push you towards valuable deal flow, reduce your search frustration and prepare you for acquisition.
Building a Network to Strengthen Your Search
In one capacity or another, we’ve all been told to “build your network.”
Hearing those words can be maddening because building a reliable network, especially when you’re an individual without a small network, to begin with, is exceptionally difficult. Despite your industry, field or career stage, nurturing and building professional relationships with the right people takes patience and perseverance.
As an independent buyer, it’s hard to know what advisors you should connect with and how to find those advisors. Village Wellth’s article Who Do You Need on Your Team When Buying a Business will clue in on who you should connect with.
Once you know who you need in your ecosystem, keep the following in mind when you begin reaching out to advisors—these points will help you build a solid acquisition network.
- Have confidence — Put yourself out there. It’s always intimidating to reach out to new people; however, most advisors in the acquisition ecosphere want your business purchase to be successful. The sooner you reach out to your advisors, the more privy you’ll become to information. Having all the information you need early on, whether it’s legal or financial advice, will help the ease and success of your transaction and subsequent business ownership.
- Use your voice, not your keyboard — The best way to contact professional advisors is by calling. Although it can often feel easiest to break the ice via email, it’s not the best form of communication when it comes to introductions. Emails can get lost in the shuffle, and it’s easier for people to put off responding to an email than it is a call. Using your voice also gives advisors an idea of who you are as an individual and buyer—showing them that you’re committed to having a conversation and seriously ready to get the ball rolling.
- Be clear — Clarity is vital. Always be clear with your intentions and communicate to advisors why you are contacting them. Advisors are busy. If you’ve articulated your search, it’s helpful to send them an outline of what you are looking for. The more specific you are when introducing yourself, the better chance you have of getting through to them.
- Track your communication — Keeping track of your communication is helpful. Build a map that charts which professionals you’ve been in touch with and at what frequency. In the early stages of acquisition, these advisors need to remember you. Likewise, it’s important for you to remember who you’ve spoken to and what you’ve discussed. Touching base with your new network regularly will keep them actively engaged in your search, acquisition and network.
Building a Network, Simplified
In the business buying ecosphere, business brokers are the main intermediaries who connect sellers to buyers. Brokers manage listings for sellers and, therefore, are typically the best source to access deal flow. This is why buyers will sometimes hire brokers to perform passive or active searches. Unfortunately, it can be incredibly tricky for independent buyers to get in touch with business brokers, and it’s common for brokers to choose to work solely with vendors.
Cold-calling brokers for access to deal flow isn’t a surefire way to guarantee your search for a business to buy. Brokers want to ensure that entertaining a conversation with a buyer is a good use of their time and resources. This is why having an established network of advisors can be a helpful way to get in contact with brokers. Because a broker needs reassurance that a buyer is credible and serious, they will commonly choose to work with the buyer that they know or have worked with before. This way they can guarantee that the buyer is ready to make a deal with the seller that the broker represents.
According to a Village Wellth contact, a business broker out of Alberta
Since joining the Village Wellth community, this broker has been able to steadily get into contact with more buyers due to the guarantee that the buyers he connects with are credible. When a buyer joins Village Wellth they have the option to become financially verified. Village Wellth verifies your financial ability to acquire by confirming your access to capital and the strength of your credit score. We share this badge of verification—not your personal information—with both brokers and advisors in our sphere.
More often than not, search frustration is perpetuated because buyers have such a difficult time reaching brokers. By managing inquiries for brokers we, in turn, become your source of representation. Through Village Wellth verification, as a buyer, you gain access to broker contacts, their deal flow as well as Village Wellth’s exclusive deal flow listings. Village Wellth also provides additional consultation to help buyers narrow search criteria and connect with particular advisors who will help them find and reach their target goal.
Village Wellth is the voice of the buyer. We exist because we want to accelerate your ability to grow and interact with a network whose resources will guide you towards fruitful acquisition.
Tips and tricks for growing a network only do so much. Building a network from the ground up is challenging—sometimes you just need a driving force who will create one for you.
In joining Village Wellth, you simplify your search to find a business to purchase and enter into a diverse community. Our trusted network of experienced professionals includes everyone from business lawyers to brokers to CPAs and valuation experts. These people will guide you along your acquisition journey, fortify your confidence as a buyer and equip you to continue on as the successful owner of your future business.