IBA, as the premier business brokerage firm in the Pacific Northwest, is firmly established as a respected professional service firm in the legal, accounting, banking, mergers & acquisitions, real estate, and financial planning communities. Periodically, we will post guest blogs from professionals with knowledge to share for the good of owners of privately held companies & family owned businesses. The following blog article has been provided by Paul Long of Gesa Credit Union (https://www.gesa.com/):
The Significance of Business Experience When Buying A Business
Buying a business is a significant undertaking that requires careful consideration and being strategic when making decisions. One of the key factors that can impact success is the buyer’s level of business experience.
Individuals with prior business experience should be familiar with managing day-to-day operations, finances, and any regulatory issues that come up. These Buyers with experience are better equipped to assess the strengths and weaknesses of a business, enabling them to identify opportunities for growth and areas that may require improvement.
Industry dynamics is a benefit of having experience. Different industries have different trends and regulations. Individuals with prior exposure within that industry are better positioned to grasp these intricacies, reducing the learning curve associated with the business. This not only streamlines the due diligence process but also enables buyers to make more informed decisions regarding the compatibility of their skills and expertise with the target business.
Understanding the financials is a critical aspect of business ownership, and individuals with prior business experience, including management, typically possess a better understanding of financial principles. Understanding financial statements, the feasibility of investment decisions, and implementing sound fiscal strategies lead to the business’s success.
Risk management is also a part of business experience in which entrepreneurs with a history of business ownership have encountered challenges and uncertainties like what was experienced in 2008 and 2020. This exposure gives them the ability to mitigate risks effectively. During the business buying process, experienced buyers can identify potential pitfalls, develop contingency plans, and navigate uncertainties with a strategic mindset.
Having business experience is paramount when buying a business. It provides a practical understanding of business operations, confidence in tackling issues, strengthens financial understanding, and improves risk management capabilities.
SBA lenders like Gesa Credit Union ask for a resume when applying for a loan. The credit union wants to make sure that a doctor doesn’t want to open a restaurant or a construction company owner doesn’t want to own an adult family home.
If you find you have some management experience, but not as much as you would like, I encourage you to look at franchise options as those provide additional business infrastructure to help support your success.
If you have any questions relating to the content of this article, business banking, or using a SBA loan to acquire a business, Paul Long would welcome the opportunity to answer them. Mr. Long can be reached at (253) 300-5414 or Paul.Long@gesa.com.
IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, real estate, accounting, legal, and financial planning communities on subjects relevant to the purchase & sale of privately held companies and family-owned businesses. IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.