Choosing the type of business to purchase is another part of the process where the experts advise giving yourself some breathing space. Too many new buyers, they say, decide in advance that a particular field is the only one worth pursuing. The buyer might have a background in that field or may have daydreamed about being in that industry for years. That doesn't necessarily mean it's the right field to buy into. Jones estimates that while as many as 95 percent of business buyers who come to his office arrive with a specific field in mind, only a handful of those who actually buy do so in the area they initially had in mind.
Why? Mostly because the vast majority of buyers all have their eyes on one field--manufacturing, according to Yegge, Jones and Hertenstein. "There are so many buyers looking at so few deals in manufacturing that the market pushes a lot of buyers out of the ballpark," Yegge says. Other buyers migrate to different fields because they find their financial expectations for the first field were out of whack with reality or because while shopping around, they find a business they never knew about appealed to them.
When Garrety went shopping for a business, he didn't look in areas he was familiar with, such as the oil industry, but opened himself to whatever kind of business could match his mix of managerial talents and financing. "I ruled out anything retail because my work had always been industrial," he says, but other than that, "I didn't have a specific target. I felt I could apply my background to a broad range of businesses. I just waited for the one that I felt most comfortable with." The one he eventually bought fit his needs in a variety of ways, from his instant and easy rapport with the seller to the company's location in an industrial park just a short drive from Garrety's home.
Comfort is crucial. Once you decide to slip outside the industry you originally had in mind, the experts say, be careful not to roam so far afield that you lose yourself. Sometimes, Hertenstein says, buyers "get so frustrated when they can't buy their dream business that they end up buying something they know nothing about. Then it's a struggle to learn how the business operates, and even if you have a contract with the seller to stick around for 90 days until you learn the ropes, that's just not the same as knowing from long-time experience." With so much money on the line, Hertenstein advises, it's better to hit the ground running in a business you at least have some feel for.
"You don't want to be in the painful position of trying to learn the business as you go, because the customers already know the business and if you miss a step because you just didn't know, they'll leave you," Yegge says. If you find yourself investigating an industry you don't know well, he suggests you contact the industry's trade association or a local leader in the field for inside tips. "Ask what a typical workday is like, how the year is arranged, if there are unique things nobody outside the business ever understands," he says. "Anything that can help you understand the culture of that business will help you establish your own comfort level." The same kind of research would be valuable for someone who's always dreamed of being in a certain field but hasn't yet started looking at actual prospects.
Should you buy through a business broker? Garrety believes that, as with buying a house, it's the only way to know what's out there that suits your needs. "There's an awful lot of legwork you'd have to do to find out what's for sale," he says. "If there's only one business you want to be in, a broker isn't necessary, but if your target is broader, like mine was, it's good to have a broker who can show you what's out there." A broker can also nudge you outside the field you had been targeting and help you determine which businesses suit you.
But not even the best broker, Savage emphasizes, can prepare you for the first few inevitable surprises that lie in wait for new owners. Still, that shouldn't be a problem, he says: "If you have any spirit at all, you're buying a business because you operate at a different anxiety level than most people do anyway."
Anthony Wayne Business Exchange, (219) 485-1990, http://www.anthonywayne.com
Jeff Jones, (713) 680-1200, http://www.certifiedbb.com
North American Equity Corp., (219) 426-0404, fax: (219) 420-7218
San Jacinto Staple & Supply, fax: (713) 690-7753
Bill Yegge, firstname.lastname@example.org