Why the Best Businesses for Sale Aren't for Sale
Starting a new business is a lot of work, even if you’ve done it before. You can feel pretty bad, too, when you’re find you're spending a lot of money and time developing something that already exists. Your task then becomes to make something better than the existing competition's.
Alternatively, of course, you can just buy the competition.
Purchasing a business, either to supplement your existing business or to operate in addition to your current brand, is a great way to build and expand your entrepreneurial empire. Solopreneurs can do it just as easily as a brand like Facebook can acquire other businesses to roll into its conglomeration.
What happens, though, if you can’t find a business for sale that fits the bill? I say, "Just buy it anyway." Do you think Facebook waits for apps to go on sale before making an offer?
For example, I purchased a business that wasn’t for sale, and it was one of the best decisions I’ve ever made. I’ve expanded my own brands, supplemented my products and bolstered my income because of that decision, and all it took was making the right offer.
The problem with businesses that are for sale
It’s easy enough to just go to a business marketplace where entrepreneurs sell off the businesses they no longer want and others snap them up.There’s just one problem with that strategy. Most of the time, those businesses don’t work. They’re terrible, and here’s why: Whenever an entrepreneur is putting a business up for sale, particularly on a popular marketplace, there has to be a reason behind that offer.
Generally, the reason is that the business is failing. The product might no longer be relevant, or it might have been supplanted by a more powerful competitor. It could be a product or service that was poorly built, and its poor quality is catching up to it. It could be a brand highly dependent on a temporal trend that’s fading; think how many websites sprang up around the original XBox release, which either had to rebrand when subsequent consoles were released -- or failed entirely.
Not all for-sale businesses fail, of course. Sometimes, the owner has a good reason for stepping away. Medical issues could be the reason, or new family members on the way, or major life changes; similarly, retirement or even just a change of heart could be the reason. That said, these scenarios are the exception, not the rule. Most of the time, there’s a good reason a business is for sale, and it’s not a good reason for you to invest.
Buying what’s not for sale
Buying a business that isn’t listed for sale isn’t really all that difficult. All you need to do is make the owners an offer they can’t refuse.
This doesn’t mean going all Godfather on them. No horse heads in their beds! On one hand, you can be like Amazon, making an offer to buy Whole Foods; Whole Foods wasn’t exactly up for sale, but when Jeff Bezos offers you billions of dollars, there’s no valid reason to say no.
You don’t have to be worth billions, either. Web analytics company Crazy Egg pulled off a similar offer, in 2012, to buy Hello Bar, an at-the-time not-for-sale business. The company was on the prowl for existing products in the user-experience optimization niche and made an offer.
So, if you're considering a similar move, think about what the target business is likely worth to the owner. Try to estimate that owner's cash flow and estimate the same sort of reasonable offer you see on a marketplace. Balance this estimate with the amount you’re willing to spend on the business in the first place. Then, draft up a pitch and shoot the owner an email.
You have four possible outcomes from this approach. The first is acceptance, in which case ... great! You can work out the details and finalize the purchase in whatever way you and the business owner agree works best. The second possible outcome is that you're ignored. Your email offer has disappeared into the void, never to be seen again.
This is not as bad an outcome as it could be; you don't know if the owner ignored your message or missed it, or whether the lack of a response was an unspoken refusal. You can always wait a bit and follow up.
The third and fourth possible outcomes might be outright refusals. In one scenario, the refusal might be strong; there’s no way the owners will sell their business, they have too much of their lives wrapped up in it to sever the chord.
And here, of course, you can still consider buying the business and keeping the owner(s) on to manage it; but that’s a tough offer. What’s in it for them, if they’re still doing all the work -- just funneling the money to you? If you have an answer to that question, you might still be able to work out a deal.
The other kind of refusal is a weak one: a rejection of the current offer, but the beginning of a negotiation. The owners won’t sell for that price, but maybe for price X? Just negotiate and figure out how much you’re willing to spend.
Sometimes, it will simply be a matter of timing. When I finally purchased that not-for-sale business I referred to earlier, I had been negotiating back and forth with the owner for months. I ended up buying it at a discount because I followed up during a hard time for the business, and the frustration and downturn in business had taken its toll.
When all is said and done, chances are pretty good that you'll gain an excellent new business to put under your belt, with established connections, customers and products ready to expand and integrate with your own.