It’s no secret that starting a new business is hard work, and many aspiring business owners can face challenges throughout the process. According to the U.S. Bureau of Labor Statistics (BLS), about 30% of new businesses fail within the first two years, 50% within the first five years, and 70% within the first 10 years. 

If you want to own a business, building it from the ground up is not your only choice. For instance, Good Earth Landscaping and Maintenance, LLC, a full-service landscaping firm in the Roaring Fork Valley, has grown several times over after co-owners Josh Austin and Jeff Margulies purchased the business nearly seven years ago. With the help of FirstBank, Josh and Jeff were able to finance the acquisition of the company’s new headquarters, purchase necessary landscaping equipment, and fund working capital needs during expansion.  

Like Good Earth, you may consider purchasing an established business. This option can be lower risk than starting your own, as it already has a fleshed-out concept, existing clients, suppliers, and a financial history. However, acquiring a business still comes with its own set of obstacles.

Here are five things you should consider when navigating the intricate business acquisition and financing process. 

How to help buy a business

1. How to find opportunities.

You can uncover potential opportunities by engaging in networking activities within the local business community and industry-specific events. When business owners retire, they often prefer to pass their businesses on to trustworthy successors. Networking events will allow you to make meaningful connections with possible opportunities.

Additionally, you can search opportunity listings online through business-for-sale websites, industry-specific marketplaces, and business brokerage websites. But it may be wise to collaborate or consult with experienced advisors or brokers. This can help uncover opportunities and ensure a smooth transition for you and the business once purchased.

2. Know when it’s the right business to buy.

Before committing to any businesses, you first have to define your acquisition criteria and target industries. For instance, do you have direct industry experience or financial knowledge on how to run that type of business? Many lenders want to be confident your experience will help it succeed.

“We need to have confidence in the individual we are lending to and that speaks to the importance of developing a relationship with a banker,” said Kyle Sickman, Executive Vice President at FirstBank. 

3. Ensure it’s stable.

One of the most important things you can do is ensure you’re buying a stable, long-term business with a strong management team. Market trends and the long-term growth of that industry will be essential factors helping you determine if those businesses are good investments. Not only will the future trajectory of the company impact the amount you purchase it for, but it will also indicate the vitality of the business going forward.

You can determine a business’s viability by analyzing financial records, customer reviews, and the business’s overall health and understanding how revenue is generated. You can also conduct thorough market research to pinpoint sectors where you expect demand to endure over time and to forecast consumer behavior around that business’s products and services.

4. Find businesses you can optimize.

Another important part of your transition should also include implementing a new revenue growth strategy, including expanding product or service offerings, tapping into new markets or enhancing customer engagement. New business owners must plan for post-acquisition growth to take advantage of all possible opportunities and to set the business up for lasting success.

How to help prevent costly mistakes

1. Get your finances in order.

You’ll want to ensure your personal finances are in order and you have a strong personal balance sheet with equity and “pledge-able” assets before deciding to buy a business. If you need financing, keep in mind you may be required to provide proof and financial statements about your own personal assets to your lender.

2. Assemble a team of professionals.

Assembling a team of professionals, including accountants and business brokers, is crucial for the acquisition process. These professionals can represent your interests during the negotiations and ensure all sale documents are drafted correctly.

3. Consult an attorney.

An attorney will know what necessary documents are needed to ensure the buyer’s and seller’s interests are well-represented and protected during the acquisition process. The legal system and contracts can also be tedious and intricate, but navigating these successfully can help your business avoid future disputes or other legal matters.

4. Speak with a small business financial advisor.

A credited financial advisor has the expertise to help you fully tap into the benefits of your initial capital investment. They can even help you assess the viability of your business model and outline the strategies and timelines important for your path to profitability.

Acquiring a business is a significant endeavor, but with the proper resources and support, you can set yourself up for a successful transition and pave the way for a rewarding future.

Additionally, FirstBank is committed to meeting aspiring business owners with strategic guidance to ensure they are well equipped to seize acquisition opportunities and make decisions supporting the business’s long-term growth.

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