For a business owner looking to sell a business, learning as much about the sales process would probably be one of the first few steps that he might take in preparation for the sale. Consequently, researching about buyers’ experiences and expectations when buying a business such as the one he owns may not be one of the priorities of a business seller.
To shed light on what the experience is like to be on the other end of the spectrum of buying a business, Mike Rabinovich shares his story on buying the successful Miracle Method franchise in Portland, Oregon.
The business that Mike bought was previously owned by Dan Ness. One of Morgan & Westfield’s clients who were able to sell their business, Dan worked and wasted time and resources with two previous brokers, both of whom did not find him any qualified buyers and prolonged the sale of his business by one year each.
Read Dan Ness’ success story: You Need Persistence in Selling Your Business
The road to the sale of Dan’s business has been full of detours and roadblocks, but with persistence and Morgan & Westfield to guide him through the process, he was able to close a deal with Mike.
Unknown to business sellers, the process of buying a business can be just as stressful and time-consuming for a buyer. Not only are buyers looking for a business in a particular location, they are also searching for a specific type. Mike, for example, is seeking a manufacturing business for six to seven months until he found Miracle Method.
Mike recalled: “When I started looking for a business to buy, I initially started looking for manufacturing businesses because that's something that I was more comfortable with. But as I was looking, it's a fairly long and complex process looking for a business.”
Buyers also consider the business model when they look for a business to purchase. Some may prefer owning a franchise, and others may want to buy an independent business.
Even though Mike was unfamiliar with the industry of Miracle Method, he liked that it was well-established, well-known and had a solid product offering. At first, however, Mike was not open to the idea of owning a franchise because he thought it would limit his freedom on the way he wanted to run his business.
Mike explained: “Initially I was a little apprehensive about the franchise. I did not know much about them, but my perception was that a franchise would dictate a lot of what I do and how I do it. And once I started investigating, I actually like the franchise model. And now, I like it even more that I have been a part of it.”
Like business owners who are selling their business, buyers have a set of expectations when they are buying a business. Mike is no different from other buyers in this regard. Below are some of his expectations during the process of buying the Miracle Method business he now owns.
A buyer is as eager to close as any seller. – Any business seller will want to hand over his business into capable hands as soon as possible. The same can be said about a buyer who has set his sights on buying a business. Although he is eager to close the deal, the buyer will, however, take as much time as needed during due diligence.
Mike recounted his experience during the closing: “I thought we could do it a little quicker. My expectation was probably three to four months to close, but it took longer. Due diligence took a little longer. Financing took a little longer. Basically, everything took a little longer than I thought it would, but it didn't take too much longer.”
Listen to our podcast with Dan Ness: I Sold My Business – Dan Ness
A buyer will delve into as much data and records on the business. – It’s a given expectation that buyers will look at sellers’ books. Naturally, if an individual is to invest a significant amount of time and resources in a business and to make a living out of it, that person will inspect every minute detail of the business. Aside from requesting to see the usual financial records during due diligence, a buyer may also ask for analytical data that the seller may not currently have.
In Mike and Dan’s deal, Mike asked Dan for data on which territories were within the scope of the Miracle Method business and how much were the earnings for each of the territories. This additional data took a while to be produced, thus extending the period for due diligence.
“From my perspective, I expected to see a lot more data. I'm a very mathematical person, so I kept asking for more data,” Mike said.
A buyer expects the transition to take longer. – Sellers often provide anywhere between 30 and 60 days as a transition period to train the buyer on everything he needs to know to run the business effectively.
For the new owner, however, the transition period doesn’t end when the training with the business seller is complete. Aside from learning how to run the business from the seller, the buyer will also take some time to operate the business the way he wants it to run.
On this, Mike explained: “I don't think the transition period is over yet. I think we have picked a lot of low-hanging fruits in the way of business improvement, but it's not fully running the way I like it to run. And there are quite a few changes that are forthcoming that will alter the business pretty significantly.”
A buyer will look at opportunities for growth. – A buyer will be interested in buying a business that is not only profitable but also has the potential to grow. As Mike expected, the business’s revenue increased. Along with growth, he also added new members to his team. He has been looking into further development in terms of product quality and software and targeting underdeveloped sectors like hospitals.
“From a sales perspective, I'm looking at essentially more growth. Then from a quality perspective, we're looking to improve our quality,” Mike said.
Overall, Mike has been satisfied with how everything turned out. He was able to grow the business’s revenue, his team and buy another franchise in a different location. This proves that once the business seller hands over the keys to the new owner, it’s up to him whether to steer the business in the right direction to reap the maximum benefits of his investment.
Mike said: “I'm very happy with the way things worked out. It exceeded my expectations. I expected we would grow, and I expected we would find some cost savings. It just ended up being much better than I even projected.”
Listen to our podcast with Mike Rabinovich: Looking at the Sale Process from a Buyer’s Perspective.