When looking for businesses for sale, it’s worth remembering that only one in five businesses for sale are ever advertised. For that reason, you should take the initiative and seek out prospective sellers rather than relying on finding them through adverts.
Approach Business Brokers
There are advantages and disadvantages of using a broker to source businesses for sale.
On the plus side, business brokers are already working with willing sellers. They’re also likely to have comprehensive details about any business that’s up for sale. This will speed up the buying process because you won’t have to wait while the seller compiles the information you need.
However, there’s a risk that the broker will have inflated the seller’s expectations in the same way that estate agents tend to do with property owners. There is also a strong possibility that to get the best price for their client (the seller), they will encourage you to get into a bidding war.
A broker is also likely to want you to have 100% of the purchase price in cash at the point of sale – often because they know that the asking price does not stack up for a lender.
Sourcing & How To Find A Business To Buy
So the question becomes how to find businesses for sale without resorting to brokers or looking at adverts. They include:
- Word of mouth
Talk to your personal and professional network.
Your clients or suppliers may also know people who could be persuaded to sell their business to you. Let them know the kind of business you’re interested in and in which sector.
- Pitching to competitors
Arrange meetings with competitors and suggest that your two companies merge.
- Web listings
There are online directories that list businesses for sale like www.rightbiz.co.uk. Find one that specialises in your chosen sector.
- Direct Marketing
Buy or build a database that has the names and physical addresses of business owners in the specific sector you’re targeting.
Write a personal letter. Explain that you’re a private investor and share your motive for wanting to buy businesses in their sector.
Place adverts in publications that serve your sector. Your advert can say something like, ‘Private investor seeking new business opportunity. Contact [your email] for more information.’
- Search engine ads
Advertise on the major search engines like Google or Bing to attract willing sellers. You’ll need to invest in PPC advertising and have a landing page where sellers can enter their contact details.
- Display ads
You can attract the interest of willing sellers by using Display Ads on platforms such as LinkedIn, Google and Facebook.
- Organic social media
Write brief posts on social media platforms such as LinkedIn, Facebook and Twitter to let your followers, fans and friends know that you are actively looking for businesses to buy. I put one post on LinkedIn and received 17 responses.
- Trade Shows
Visit trade shows that cater to your target sector. Use it as an opportunity to contact business owners. Let them know you’re interested in buying profitable or distressed companies.
- Other dealmakers
Get to know other dealmakers and let them know the sector you’re looking at, and what kind of businesses you’re interested in buying.
Form a partnership with another dealmaker.
- Deal swapping
Swap deals with other dealmakers. After all, a deal you don’t want might just be someone else’s ‘dream deal’.
There are a few drawbacks to going through administrators. You won’t be able to carry out much due diligence on the purchase. So you’ll be buying the assets ‘sight unseen’ and will probably have to make a blind bid. On the plus side, administrators might agree to staged payments.