The Ultimate Guide To Business Acquisitions

You have finally made up your mind about the type of business you want to buy. You've vetted all the ups and downs of running the business, explored all the opportunities buying a business offers, and obtained financing to finalize the purchase.

Now to the big question: How Do You Proceed with the purchase of the Business?

Make Sure That the Business for Sale is What You Really Want

There are hundreds of businesses for sale in California and multiple marketplaces showcasing the features and profits these businesses can provide to end-users. Before you jump to a conclusion about the type of business you want to buy, endeavor to check out different options with the same market potential. Until you are certain you are making the best decision possible, do not stop searching but do not let it go on for a long period of time.  If a business owner is selling their business and finds you have been looking for 6 months or more they will lose interest in selling the business to you.

Find Out if the Location or Place of Business is What You are Looking For

Where is the business located, and how convenient is it from your place of residence to its location? Is the business strategically positioned to suit its target market? California is a busy state. Settling for a business that's miles away from your place of residence can disrupt productivity, affect sales, and leave you running a business that quickly drains your enthusiasm and probably your profitability.

Is the Industry Sector Booming or Stagnant?

Making the best possible decision during the acquisition process determines how your journey to becoming your own boss will be. Buying a business in a booming industry sector can help heighten confidence, get a profitable return from your investment within a short period, and keep you investing more in the product or service than marketing.

Here is an overview of 15 booming industry sectors in California.

Manufacturing Business:

In the manufacturing industry, there are a lot of Research and Development or R&D and initial cash expenditures involved in equipment and training to use the equipment.  There is also a move to more automation and less labor which results in greater profits; as long as you understand and watch these trends.

Discover how to find a manufacturing business for sale in California.

Business Services:

During times of strong economic growth, the business services sector can expect to thrive. According to First Research, this industry will continue to grow at just over 5% for the foreseeable future. 

Construction Business:

The construction industry will be strong for a long time to come and can be a very profitable business when costs are controlled, and it is managed properly.  Do not forget.  To own a Construction Business in California you will need the necessary license plus you may need a deep understanding of Accrual accounting instead of Cash accounting.

Wholesale Distribution:

Since many distributors finance their inventory, they can be sensitive to interest rates, so the current low rates are a good sign, making these businesses a desirable investment.

Discover how to find a distribution business for sale in California.

Healthcare and Medical Practice:

Annual spending on healthcare in the United States is nearly 17% of the Gross Domestic Product (GDP). Revenues are expected to grow by 6% annually over the next several years. This means that many medical practices have great earning potential.  Once again, to own and operate a Medical Practice in California the owner needs to be licensed by the Medical Board of California.

Logistic Industry:

Finding qualified employees and keeping them, along with managing health risks, is vital to company success. However, with the right management strategy and a strong organizational system, logistics can be a great business. 

Consumer Product Industry:

The consumer products industry has experienced exponential growth, especially in environmentally conscious and organic products. As the demand for these products grows and consumers move toward greener choices, there are some great expansion opportunities.

Industrial Product Industry:

The industrial products sector largely depends on the health of other businesses. However, according to First Research, this industry will continue to grow as businesses recover from recent events and begin operations and production again.

Industrial Services Industry:

The success of these businesses is tied largely to the clients they serve, but creative diversification enables growth even during a recession.

Information Technology Industry:

Information Technology (IT) businesses are essential and profitable in California due to many tech firms and start-ups in Silicon Valley and Orange County in southern California.

Aerospace and Defense Industry:

This industry's primary benefits are government contracts' long-term nature and larger companies' relative stability that hold these contracts.

Automotive Industry:

While service, repair, and even parts sales may be slowing, manufacturing and innovation mean a bright future in the "new normal" that will soon emerge.

Telecommunication Industry:

The telecommunications industry is among the few experiencing growth and challenges at the same time. With more people working remotely and working from home, the industry has experienced growth, and opportunities abound.

Education Industry:

The education industry grows at a constant rate. Training for essential services and trades never slows or stops completely. The switch to online learning and distance education means greater long-term profit potential and a larger pool to pull from for enrolment.

Packaging Industry:

First Research states that this industry will continue to grow at just over 4% annually for the foreseeable future, provided companies adapt to changing consumer and business demands.

Does the business meet your short-term and long-term goals?

Before finalizing your plan on becoming your own boss, revisit your checklist with the goals you wrote down.  Do not settle for any business without analyzing its potential to keep up with your short and long-term goals. Striking a balance between short-term goals and long-term objectives requires a solid measurement framework and continuous critical thinking. Evaluate the business's credibility by weighing it on an equal scale of your long-term and short-term goals.

Consider Having a Strong Acquisition Team

A strong acquisition team means having people interested in helping you make the best buying decision. If you are looking to buy a low to middle market business, a M&A Advisor to lead your team is the best option.

A M&A Advisor, to use a football analogy, should be like a quarterback.  As the buyer of the business, shout your instructions and observations to your M&A Advisor so they make the right play to get you to the touch down line. 

A qualified M&A Advisor acts as a middleman between business owners who are looking to sell and interested buyers. A good M&A Advisor, much like a real estate agent, handles every aspect of the deal, from prospecting for potential buyers to the final negotiation.  However, a buying a business comes with much more complexity than buying a piece of real estate.