There are far more people looking to buy a business than there are good businesses available.
That means finding a great opportunity is only part of the challenge. The real difference is being prepared when the right business comes along.
In this video, I explain why business buyers outnumber sellers, why so many businesses never actually sell, and what successful buyers do differently. We cover competition, business valuation, due diligence, financing, and how to stand out with brokers without overpaying for a business.
If you're serious about buying a business, this video will help you understand why preparation—not excitement—is your biggest competitive advantage.
If you're preparing to sell a corporation, it's important to understand what happens to shareholder or director loans. Many business owners overlook these loans until the sale process begins, only to discover they can significantly affect the structure of the transaction.
The answer depends largely on whether the business is sold as an asset sale or a share sale.
What Is a Shareholder Loan?
A shareholder loan is money that an owner lends to their own corporation instead of contributing as equity.
Many owners choose this approach because it allows them to withdraw those funds later without some of the tax consequences that may apply when taking money out as dividends or selling shares. It also provides flexibility when financing a growing business.
What Happens in an Asset Sale?
In an asset sale, the buyer purchases the company's assets—not the corporation itself.
The selling corporation continues to exist after closing, which means any shareholder loans generally remain with the company. Once the assets are sold and cash is received, the owner may choose to repay the shareholder loan before winding down or restructuring the corporation.
This is one reason sellers should involve their CPA early in the sale process to understand the tax implications.
What Happens in a Share Sale?
In a share sale, the buyer purchases ownership of the corporation itself.
At closing, shareholder loans are typically handled in one of two ways:
The loan is repaid as part of the transaction.
The shareholder loan is transferred to the buyer as part of the overall deal structure.
Which option makes the most sense depends on financing, taxes, and how the purchase agreement is negotiated.
Why Professional Advice Matters
Every business sale is different.
Factors such as existing bank loans, personal guarantees, tax rules, and financing arrangements can all influence how shareholder loans should be treated.
Working with experienced accountants and legal advisors helps ensure the transaction is structured efficiently while avoiding unexpected tax consequences.
If you're buying or selling a corporation, understanding these details before negotiations begin can prevent costly surprises later.
If you want to learn more about creative private investments, check out my book Invest Local — available on Amazon or as a PDF from DCBBooklist.com.
Key Takeaways
Shareholder loans don't disappear when a business is sold—they're handled differently depending on whether the transaction is an asset sale or a share sale. Understanding these differences early can help sellers structure a more tax-efficient and successful exit.
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Thinking about selling your small business? The best time to prepare is long before you list it for sale.
In this video, I answer the top questions business owners ask about selling a business, including how to value a business, when to start exit planning, seller financing, business valuation, goodwill, confidentiality, due diligence, transition planning, and choosing the right buyer.
You'll also learn why preparing your financial statements, reducing owner dependence, improving profitability, and creating a solid exit strategy can increase your business's value and make it more attractive to buyers.
Whether you're planning to retire, looking for a business exit strategy, or simply want to understand what buyers look for, this guide will help you avoid common mistakes and prepare for a successful business sale.
Buying an existing business can significantly reduce the risks associated with starting from scratch—but choosing the right industry is just as important as choosing the right business.
Many first-time buyers focus on finding a profitable company. Experienced buyers focus on finding an industry that offers long-term stability, growth opportunities, and a good fit with their skills and goals. Before making an offer, it's worth taking a step back and evaluating the industry itself.
Start With What You Know
Industry knowledge gives buyers a tremendous advantage. Understanding customer expectations, operational challenges, and common financial benchmarks makes it much easier to evaluate opportunities and avoid costly mistakes.
If you're entering a new industry, invest time learning how it works. Read books, attend industry events, and speak with business owners before committing your capital.
Look for Industries With Plenty of Opportunities
Industries made up of independently owned businesses often provide the best acquisition opportunities. A larger number of potential sellers gives buyers more options and improves the likelihood of finding a business that matches their budget and objectives.
Limiting yourself to industries dominated by only a handful of large companies can dramatically reduce your chances of finding the right acquisition.
Consider Long-Term Market Demand
A business may be profitable today, but what will demand look like five or ten years from now?
Strong industries typically benefit from consistent customer demand and favorable long-term trends. It's also important to consider demographic changes, economic cycles, and shifts in consumer behavior that could affect future performance.
Find Businesses That Can Grow
Some industries naturally offer more room for expansion than others.
Look for businesses that can grow by:
Expanding into new markets
Adding products or services
Opening additional locations
Acquiring competitors
Growth opportunities can increase both profitability and the eventual resale value of the business.
Evaluate Competition Carefully
Not every business can compete effectively against large online retailers or national chains.
Many successful acquisitions occur in industries that rely on local relationships, specialized expertise, or customized services that can't easily be replaced by e-commerce.
Choosing an industry with a strong local advantage can create a more durable competitive position.
Don't Ignore Profitability and Cash Flow
Healthy profit margins and predictable cash flow make businesses easier to finance, operate, and grow.
Industries with stronger margins often require less working capital and provide owners with greater flexibility when economic conditions change.
Make Sure the Business Fits Your Goals
Even an excellent business can become the wrong investment if it doesn't match your lifestyle or interests.
Consider:
Your experience
Your long-term goals
The amount of time you want to spend operating the business
Whether you'll enjoy working in that industry every day
The best acquisition is one that fits both your financial objectives and your personal aspirations.
If you want to learn more about creative private investments, check out my book Invest Local — available on Amazon or as a PDF from DCBBooklist.com.
If you're considering buying instead of starting a business, Buying Versus Starting a Small Business: Searcher Startup offers practical guidance to help you make better acquisition decisions.
Key Takeaways
The best business buyers evaluate industries before evaluating individual businesses. Choosing an industry with strong demand, growth potential, healthy margins, and a good personal fit lays the foundation for a more successful acquisition.
👉 Want deeper dives like this? Join my email list at DavidCBarnettList.com for early access to videos, insights, and 7 free bonus gifts.
In this "best-of" interview, I sit down with HR and change management expert Greg Griesmer to discuss what business buyers and owners often overlook when acquiring and growing companies.
We explore change management, company culture, hiring strategies, employee retention, HR due diligence during acquisitions, remote work, hybrid teams, and how leaders can successfully guide organizations through periods of change.
Whether you're buying a business, leading a growing company, or managing a team through transition, this conversation offers practical advice to help you build stronger organizations and avoid costly people-related mistakes.
One bad business acquisition can cost far more than money.
In this video, I share the real story of an IT professional who bought a franchise business without the right deal training, missed critical due diligence red flags, and ended up trapped in a failing business with a seller note he still has to repay.
If you're thinking about buying a business, this story highlights why due diligence, deal structure, seller financing, and proper negotiation matter far more than simply finding a business for sale.
