Step #1 to Buying a Small Business

(Know Thyself)

Yes. You. Can.

You can buy a business. A profitable business.

It’s not like walking into a gas station and grabbing a greasy corn dog off the spinning thingy. It can take a while, and there can be a bit of work involved, even some heartburn (like the gas station dog) but let me tell you, buying a business is worth every nasty burp and scary challenge you may encounter.

Speaking of lunch, my first visit back to Cracker Barrel after I bought my tax business? It was extremely satisfying, to say the least, when that bitchy manager asked me what I was up to, where I was working. It felt so good to look her right in the eye, with a smug smile on my face, and tell her that I had bought a business. (I know that sounds terrible, but it did feel good. Sorry, not sorry!)

If I managed this astronomical feat as a single mom waiting tables with two young girls, then yes, you too can buy a business.

If you’re worried about financing the deal, you can read how easy it is ​here.​ If you’re wondering what to say to the seller, you can find 34 questions to ask, plus 10 Don’ts ​here​.

Buying a business will most likely be the largest purchase of your life. And I hope it is! It will be one of the most impactful decisions you’ll ever make, right up there with picking your life partner. And just like marriage, you don’t meet someone and end up at the altar on the same day. It takes baby steps. It’s a process over time, with trial and error, what we normally call dating. We even call it a game, the dating game. Buying a business works much the same way.

I’ve introduced my process before, on a high level. Today we’re going to dive into the real-life steps to get started buying your first business. Grab a pen and paper or start a new spreadsheet!

The Kirkman 4 K Approach to Buying a Business is based upon gaining knowledge in four key areas simultaneously.

Know yourself.

Know your industry.

Know how to transition and run the business.

Know how to do the deal itself.

Step #1-Start with knowing yourself.

It may sound like foofy-hippy advice, but it’s really about solidifying your plan, developing your business buying criteria. It’s about not just buying a business, but buying the right business, the right one for you and your family. It’s knowing your net worth, knowing your skill set, knowing your cash on hand, your ability to secure financing, your credit score. Not guessing, knowing. Making a list of the things you would like to be doing all day and the things you don't want to do at all. Listing all the quirky things you would like out of your work life. It’s doing a deep dive on the life you want to have, as well as your starting point. It’s looking through business for sale listings online and noting what piques your interest and why.

Now set the alarm on your phone for 5 minutes. Come on! You just need to take these first baby steps and get the momentum going. Close your eyes, take a deep breath, and embrace the entrepreneurial life you’d like to build for yourself, for your family… What does it look like? What does it sound like? What does it feel like? “Dream on! Dream on!” in my best Steven Tyler voice.

Aaa-uuu-ga! Aaa-uuu-ga! (The alarm on my phone sounds like one of those old-fashioned horns my grandpa had on his little speed boat.) Time to do the work!

Know Your Financial Side

• Open an account at Credit Karma and check your current credit score.

Hopefully it’s at least in the 700s, but don’t panic if it’s lower than that. You’re still in the game. Keep track of your score and learn ways to improve it and or keep it strong. Using less than 10% of your available credit card limit is one way to build up your score.

• Make a list of the current credit available on each of your credit cards.

• Add the amount of cash you may be able to get your hands on from all other sources.

  • Savings account

  • Retirement account

  • Mattress

  • Family and friends

  • Home equity loan

I’m not suggesting you max out your cards or clean out your 401K, but it is a possibility. What I do want you to know is exactly how much cash you could get your hands on if you had to. You may be pleasantly surprised, or shockingly dismayed, but knowledge is power.

If any of those piles of money are available to be put towards a business purchase, highlight those, or make a separate list. We’re just thinking on paper at this point. One of my favorite activities😊

I’m not going to use the “B” word, no, not the one I already used in the opening. The one that looks like this, B-dg-t, and refers to your spending patterns. And I’m not asking you to give up coffee, or whiskey or anything really. But I do want you to calculate two numbers.

• Calculate how much you spend in a month to maintain you current comfortable life.

• Calculate the bare bones amount you could live on if you had to.

Knowing exactly where you are right now can be pretty powerful. It can shed some light on things and illuminate opportunities, for both improvement and for accelerated growth.

• Calculate how much you would like to make in a year, realistically.

If you’re bringing in $75K now, $100K or $125K would probably be great. We’ll work on making the millions later, but it’s not likely with your first business.

Extra credit. While you’re at it, you may as well figure your net worth.

• Net worth equals the value of all the things you own, such as real estate, vehicles, investment accounts and such, minus all your debt, like mortgages, credit card balances, student loans, and that money you borrowed from your sister last week.

It’s a great idea to create a journal for these things and even create a spreadsheet to help track and continuously monitor the components of your financial life. It will be super gratifying to look back on these numbers in a few years and see how far you’ve come! If you would like a copy of what I use for tracking, send a quick “TRACKING” reply to this email.

Know Your Skill Set

This assignment will probably be more fun, especially for you number-phobes.

(A quick warning: if you’re going to be an entrepreneur and have any level of success, you can’t shy away from your numbers. You don’t have to become a CPA like I did, but you must get at least a basis grasp of what is happening in your business beyond your bank balance.)

• Make a list of all the things you’re good at.

• Make a list of all the things you’re bad at.

• Make a list of all the things you enjoy doing, work wise.

• Make a list of all the things you despise doing.

Know Your Desires and Your Ideal Workday

• Based on the lists you made above, write down what your ideal workday looks like.

Just because you’re good at something doesn’t mean you enjoy doing it. So if you don’t, don’t. If you’re a great coder, you’re good at writing algorithms, or whatever coders do, but it makes you want to wrap the mouse cord around your neck, don’t buy a business that requires you to code.

Does your dream job entail sitting in the coffee shop on your laptop all day? Or do you dream of having a shop window you get to decorate with the changing of the seasons? Do you prefer solo work or do you thrive being part of a team? How are you at handling customer complaints? Managing inventory? Marketing? Bookkeeping? You are looking for a profitable business that needs exactly what you have to offer in order to take it to the next level.

Do you have special circumstances that you want to be able to accommodate with your new role? If you want to be able to drag your kids to the office on snow days, a nightclub may not be the right business for you. If you want to bring your cat to work, food prep is probably out. If you have family to take care of, travel may not be an option. This is your chance to design the life you deserve-- and it’s all achievable through Acquisition Entrepreneurship.

If you need to make $100K a year and still have the flexibility to care for your elderly grandparents, then buy a business that meets those criteria. If you want to make a cool mil every year with your toes on the sand, then buy a business that will allow you to do just that. The possibilities are truly endless!

Unlike working for the man, the business you buy will provide you the life you want, PLUS pay for itself. Yes, the business will pay you and pay for itself. That’s the deliciousness of buying a profitable business. But experience counts! Both bankers and sellers will be reassured, will see you as having less risk, when your experience and background are relevant to the business you’re buying.

Bonus Step

Start Exploring

There are many ways to find businesses to buy, sourcing deals as we say. No need to go too far into that right now. But since you’ve decided to get in the game, it’s time to get your Tinder profile setup. I mean, start looking through ​bizbuysell.com​, which is, kind of, the Tinder of business buying. Businesses absolutely do get bought and sold through this site, but it’s not known as the cream of the crop. With that being said, it is the perfect place to “practice” looking at businesses, to see what’s out there, to discover what type of information appears in the listings. Most of the businesses on the site are represented by brokers, so you can “practice” talking to them. You can “practice” reading and signing NDAs, aka non-disclosure agreements. Even “practice” meeting with business sellers. This process will also help you refine your business buying criteria, your Investment Thesis. Maybe you’ll get lucky, maybe not. I promise you will learn, and grow, and gain confidence in your ability to buy businesses. Yes, even more than one.

Love ya!