Saturday, June 8, 2024

So If You Want to Buy a Business – Here’s What You Should Do Next

Today, I've got a question from a viewer and his name is Vincent, who's 27 years old at that time. He wants to buy a business from one of these baby boomers that he keeps hearing about who are going to have to start thinking about retiring one day. Now he wants to know what he needs to do today in order to buy one of these businesses.

I'm going to give Vincent and many of you out there who are in the same situation some advice on what you can do today. Some of it is going to be pretty glamorous and exciting advice, and some of it is going to sound pretty boring. But it's the boring stuff that you really need to focus your attention on. Watch the full video here: 

Start Saving Money

The number one thing you have to do as a 27-year-old to buy a business from a baby boomer is start living below your means and save money. Yes, I know. It's pretty boring. But you need to save money because you're likely going to have to put some kind of cash down in a deal, or at least have cash available to pay people like lawyers, accountants, and other specialists who are going to help you finalize your deal and close it. Largely, that kind of money comes from savings. If you need to borrow money and others see that you have no savings, they'll wonder if you can't manage your own life, how will you manage a business? 

Develop Your Credit

Number two, start developing your credit. Get a credit card and use it responsibly. Put a little balance on it and pay it off, and repeat. This will help your credit score rise and qualify you for larger credit facilities. These may be personal facilities, but you may need to draw on them in the future for a deal. Start saving money, and start developing your credit score to get it high and develop credit facilities. Going into a bank, asking for a line of credit, buying a house, getting a mortgage—these actions will help improve your credit and net worth, making you look better on paper.

Choose the Right Industry

Now, let's think about the business you want to buy. Some industries are dominated by big players, while others have fractured ownership with lots of independent family-owned businesses. For example, the pipeline industry is controlled by a few giant companies, while auto repair has many small, family-owned businesses. You need to look at your skill set and interests and decide what kind of industry you would like to be in. Align that interest with an industry that has lots of independent owners because these are the people likely to sell their business to you. Put yourself into a field with rich opportunities where you'll have plenty to choose from. You don't want to have to buy a specific business just because it's the only independent one around.

Gain Industry Experience

Next, start working in that industry. Even if you're not a business owner, look for a job in that industry to develop industry-specific skills and knowledge. This is crucial because when it's time to buy a business, bankers will want to know that you have experience in that industry. If you can get a job as an assistant manager or manager, even better. You'll be able to show direct experience in managing that kind of business.

Take an Online Course

Consider signing up for my online course, Business Buyer Advantage. It's easy, cheap, and will teach you what to look for in a business, how to properly examine financial statements, do a normalization, and figure out roughly what a business is worth. When it comes time to make the purchase, you can give me a call, and I'll help you out.

Build Relationships with Suppliers

Lastly, and this is one that not many people will talk about, once you're working in that industry, start to meet and develop relationships with the suppliers in that industry. Even if your job isn't in purchasing, find out who the sales reps are or which businesses your employer buys from. Create relationships with those people. When a younger person buys a business, they often have difficulty with financing and putting the deal together. Suppliers can help you if they choose to. They help people they like, have confidence in, and believe in. For example, in an auto repair business, if you can build a relationship with a parts supplier, you could ask for help with a loan or extended terms when buying a business. These relationships can have a huge impact on your operating capital.


It's not very likely that you'll go out as a 27-year-old and buy a business from a baby boomer immediately, but here's the good news. All those statistics about baby boomers selling their businesses and the huge transfer of wealth are based on the faulty assumption that people retire at 65. 

In small business ownership, people often stay on longer. So, you'll have plenty of opportunities over the next 10 to 15 years. It's better to bide your time, get prepared, and be in a solid position to make a good deal rather than jump at an opportunity when you're not ready. You need stability as business can be risky.


David C. Barnett


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