Do You Have the Right Stuff to Own a Business?
When selling a business, I work with three main types of buyers. There is the strategic buyer, which is another company such as a customer or vendor that sees the value of integrating a business into theirs. Then you have the financial buyer such as a private equity group or family office. Finally, you have an individual that wants to be an owner operator or passive investor.
With the Great Resignation in full swing, we are seeing a tremendous increase in interest from individuals leaving their jobs and taking the plunge to entrepreneurship.
What does it take to be a business owner? If you are a business owner wannabe, you need to read on to see if you have what it takes to own a business. A large part of my job is vetting buyers to make sure they can get the deal done. 90% of buyers that begin the search don’t follow through. Business intermediaries, such as myself encounter many tire kickers. Here is what I look for in an individual seeking to buy a business:
Previous Business Ownership
This is the best qualifier. If I’m dealing with an individual as a potential buyer, that is the first question I ask. I’m ok if they weren’t successful before as an owner. Matter of fact, it is a good thing if they failed before: they know what they did wrong and will improve given another opportunity. Previous owners understand the risk and the highs and lows that come with the territory, they’re determined to succeed this time around.
Family Business Ownership
You have not owned a business before, but a family member (parents, siblings, aunts/uncles) has. Being close to a business owner and observing the challenges running a business entails is valuable experience. Working for a small business owner as the right-hand person counts too!
Life Experiences that Include Risk
If you have not previously owned a business and have not been around business ownership, the quality I look for is your tolerance for risk. What have you done in your life that shows you are willing to take a risk? A big risk! Are you prepared to personally not get a paycheck for a month or longer to keep your business running?
Tenacity
Owning a business means staying the course and not giving up. Have you shown leadership and commitment in previous organizations you’ve worked for or non-profits for which you’ve volunteered?
The current M&A environment is very active. There are many lenders that are ready to offer SBA loans to buy a business. The extremely attractive requirement by SBA is only 10% down with 10 years to payback.
Just remember, the perfect business does not exist. Every business has a blemish. A true, successful entrepreneur understands the obstacles of business ownership and dives in to make a go of it. They look at blemishes as opportunities to improve. The payoff is the freedom and satisfaction of growing a successful business.
Do you have what it takes to own a business?
This article was written by Sam Thompson. Sam is the president and owner of Transitions In Business, a Minnesota based M&A firm that specializes in selling business to business and healthcare, transportation, manufacturing, distribution and construction/trade services companies. Sam is a Merger and Acquisition Master Intermediary (M&AMI) and a Certified Business Intermediary (CBI) who has successfully guided countless business owners through the sale or merger of their company. Prior to becoming an intermediary, Sam was a successful CEO and business owner for 29 years before selling his $16 million business.