3 Things That Make it Harder to Buy a Business

Hey there entrepreneurs,

Welcome to the Better Business Brief, where I share takeaways from:

running a business I’m building to sell for millions
my consulting with business owners building to sell for millions
tips and tricks you can use to do the same

Buying a business isn’t as simple as a lot of online gurus make it out to be. In my journey so far, I’ve uncovered some unexpected hurdles that make it more difficult than it would seem if you’re just looking online at how a lot of people say it works...

So today, in less than 5 minutes, I’ll give you:

🚧 3 Unexpected Hurdles to Buying Businesses

🧠 Why & How They Happen

🗺️ How to Navigate Them

🚧 HURDLE #1

No one really WANTS to do seller financing. This one may be obvious for those who have been around the block a little, but no one is in a real rush to do seller financing if they are selling their business. They are usually looking for as much cash up front as possible. The internet will make you think that businesses can just be acquired without any money down, and in theory, it’s possible, but in practice, it is very unlikely, unless there are real problems with the business.

This makes it harder to buy a business because it means you have to come up with more money. The best way to navigate this we’ve found is to get flexible on terms with the seller of the business. There’s something called the law of price and terms that says that if the business is selling for the seller’s price, it should be able to be on the buyer’s terms, and if it’s selling for the buyer’s price, it should be on the seller’s terms. Not a science, but this is a good starting point for negotiations so that you can eventually arrive at something fair and feasible on both sides. If you still want to try for seller financing, you better have a great plan to grow the business, and you better be willing to give a great overall price, or sellers will not want to play ball with you.

🚧 HURDLE #2

SBA financing is not set up well for entrepreneurs. Like when you buy a house with a loan, the SBA mostly wants to see clean-cut, straightforward W2 income from the personal guarantor on the side of whoever is buying the business. This has been a sticking point for me personally, because my income has been from things like selling a couple of businesses, capital gains on real estate or other assets, and consulting contracts with businesses. On top of that, I wrote off a lot of legitimate large expenses of reinvesting into my business to grow it, so to the SBA, that says potential uncertainty, even if the business’ cash flow covers the debt service very well.

If you’re preparing to buy a business as an entrepreneur or other type of independent contractor, it’s probably a good idea to establish some really strong W2 income first, or go find someone who has it that is willing to become a personal guarantor of the SBA loan.

🚧 HURDLE #3

Skeletons in the closet. There are always going to be more unexpected things going on in the business you’re looking at buying than you realize. People selling their business always want to present it in the best light, so a lot of times the bad stuff doesn’t get brought up until later.

The best way to combat this I’ve found is to get good at asking the hard questions and avoid getting “attached” to a deal. You should always be pursuing multiple deals at the same time to avoid the attachment, and you should be willing to walk away if the skeletons in the closet become too risky.

So however EASY a lot of online gurus make it out to be, just know that it is way more difficult in practice. Do your homework, start talking to SBA lenders early, and prepare your personal financial situation to be able to take advantage of things like the SBA or find partnerships with those who can help you get there.

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Happy value-building to you!

See you next time for Better Business Brief,

-Brody