The road to business ownership is not an easy one, with only 50% of businesses in the United States lasting for five years and even fewer making it to a decade. However, the rewards that come with running a successful business can make the journey worthwhile. CEO Advisory Guru, LLC founding partner and best-selling author, offers advice on how to make the process of acquiring a business less daunting by using tools that stack the odds of success in your favor.
The first step in acquiring a business is conducting thorough research to ensure you have chosen the right target industry. It is crucial to verify that the total addressable market (TAM) is over a billion and that the industry is highly fragmented to keep purchase prices lower. Researching companies in the industry and geographic area of interest is essential to convince yourself that you have made the right choice before committing to an acquisition.
Utilizing tools like IBISWorld can provide detailed information on the size of the TAM, industry fragmentation, growth rate, and more. While this tool comes at a cost, it can save time and provide in-depth insights that may not be available through free resources like Google. DealStats, another tool, allows you to investigate what businesses in your target industry sell for, helping you determine the average multiple paid for companies in a specific geography and industry.
Building a list of companies in your target market and industry is the next step in the process, and tools like Hoovers and Grata can help you gather this information. Hoovers acts as a database of companies in your target area, while Grata offers more accurate data and allows for searching by various criteria, such as revenue size and number of employees. Once you have compiled a broad list of companies, you can begin narrowing it down to identify potential acquisition targets.
Working with a coach familiar with the process of acquiring businesses can be beneficial, especially for those new to the process. However, utilizing the tools and strategies outlined by the CEO Advisory Guru can increase the likelihood of finding a strong, healthy business worth pursuing. By following these steps and putting in the necessary effort upfront, you can improve your chances of owning a thriving business that will bring you financial success and stability in the long run.
