Business ownership is not for the faint of heart. With only 50% of businesses in the United States lasting five years, and only 35% making it past a decade, the risks are high. However, owning the right business can bring wealth and make growing older easier. As a founding partner of CEO Advisory Guru, LLC and author of best-selling books like The Private Equity Playbook, The Exit-Strategy Playbook, and Empire Builder, I have acquired 58 companies and built three empires. I have also identified tools that can make acquiring a business easier, and I am sharing them to help others succeed.
Research is essential when considering acquiring a business. It is crucial to choose the right target industry and verify that the total addressable market (TAM) is large enough for future growth. Looking into the fragmentation of the industry and researching companies within the sector can help in making an informed decision. Utilizing tools like IBISWorld can provide detailed information on industry size, growth rate, and fragmentation, which is essential for success in acquiring a business.
After conducting preliminary research and verifying the industry’s potential, it is important to delve deeper into what businesses in the target industry sell for. DealStats, a tool from Business Valuation Resources, can provide information on the average multiple paid for companies in a specific geography and industry. By gathering data on businesses with similar earnings, one can determine a reasonable purchase price for a potential acquisition. Building a list of companies in the market and industry of interest can help narrow down potential targets for acquisition.
Using tools like Hoovers, Grata, or state databases can help in compiling a list of active companies in the target industry. These tools offer valuable insights into the size, revenue, and ownership of companies, making it easier to identify potential acquisition targets. Working with a coach familiar with the acquisition process can also be beneficial for those new to buying companies, as they can provide guidance and support throughout the process.
Ultimately, the goal of acquiring a business is to find a strong, healthy company that will bring success and profitability. By using the right tools and conducting thorough research, one can increase the likelihood of finding a great business to acquire. Once the right business is acquired, it can provide stability and financial security, making growing older much easier and more enjoyable. With the help of experienced coaches and valuable tools, individuals can successfully navigate the process of acquiring a business and achieve their goals of business ownership and profitability.
