A d d u c e n t

Angel Investor Funding
Investors for Entrepreneurs and Business Owners!

Important Tip

I would focus on businesses that are at least 10 years old in an established industry. And that has the following characteristics:

• the business has been profitable for the last 3 years and projects the current fiscal and next fiscal year to be profitable as well
• a business with a strong balance sheet with little if any debt
• the industry is in an uptrend or given the impact of the current recession, is holding its own (one place of many where you can find this data online is:
  http://www.ita.doc.gov/TD/Industry/OTEA/OTII/want2_industry.html
• the business and industry shows growth or at least stability over the next 5 years
• the industry is fragmented, where the companies in the industry tend to be smaller and medium sized businesses
• preferably an industry where your background and experience will help you in the business and with your transactions

Do you want to run the daily operations yourself or do you want to have a general manager to take care of that for you? 

As we mentioned previously; one of the worst things you can do is start or buy a business that becomes the worst job that you ever had. 

In general I would tell you to avoid businesses that are going to require you to be the main sales person for the business if you are not comfortable in a sales role.  Or a business that requires you to do some job or perform some function that you do not like or cannot perform. 

There are cases where it makes sense to buy businesses that have a team in place to cover all the daily management tasks necessary for the business to run, prosper and grow.  Allowing for those management costs under your ownership is something you will have to factor into the viability of the deal. 

Just remember that you have to identify what you want so that you know what to look for and allow for that when you are evaluating and analyzing the deal.

Important Tip

• You will find that in fact, there are many deals to look at; and sometimes it is easy to do a deal that ultimately may turn sour.  This is important to avoid! Many business buyers swear by this saying: “you make your money on the deals that you walk away from”.  That is a word from the wise!  Do not do a deal just because it can be done.  Make sure it is the right deal for you.
• You have to put in the time and effort to find the right deal and right terms for you.  You may spend hundreds of hours over several months to do this but do not try to fit a square peg into a round hole just to get a deal done. You will look at a lot of deals and will spend many hours reviewing and looking at many that ultimately will not work out. 
• You have to be willing to put in the effort to go through each and every deal with the correct methodical approach if you want to find the ones that become successful acquisitions for you.
• You must have clearly identified objectives, wants, desires and criteria in front of you when you get started so that you do not get side-tracked and waste your time.
• If you don’t want to be involved with daily management then you have to look at the deal to make sure that there is a management team in place to run the business for you.
• And that the price and terms of the deal you structure, including paying for that management team, can be supported by cash flow of the business. 

Where do you want the business to be located?

This is purely up to you but one important thing to keep in mind. If the city or region where the business is located is sensitive to up and down economic cycles, you will want to make sure that the business has a history of being able to operate profitably throughout any downturns in the local or national economy.

How big of a business do you want to target?

This again can come down to personal preferences and what you are comfortable with.  Personally, I would consider buying one that is large enough to support a good management team infrastructure. 

That way even if you buy it with the intent to run daily operations yourself; you at least have some possible internal candidates to promote to take over daily management if you decide you want to step out of daily operations.

In order to do that you need to buy a business that has enough size or growth potential to generate cash flow to pay for daily management and to also provide you some financial benefit other than just ownership of the business asset.