4. Dig into the cost structure

Before you can review the financials of a business, you need to know the basic cost structure and revenue models. You cannot evaluate anything without knowing the difference between “good” and “bad.” Some industries have really high COGS, as labor and supplies make up most of the cost structure. Other industries may have really high capital expenditure as the equipment needed is expensive.

5. Chat with a lender

There’s no better partner for a business buyer than a lender who’s looked at countless financial statements in an industry and can spot the “do’s” and “don’ts” that come with acquiring a business. At Mainshares, we have a number of lending partners who are happy to chat with you.

6. Spend time with the owners

Once you’ve gotten a lay of the land from industry veterans and lenders, the next best approach is to spend time with the owners you’re chatting with. While many buyers may do a single shop tour before submitting an offer, others may want to spend a few hours with the owner across multiple meetings. This approach goes a long way insofar as getting buyers up-to-speed with the industry and building a relationship for advice and mentorship after the acquisition.

7. Go for a ride-along

Aside from spending time with the owners in an office or a restaurant, ask the owner to take you for a ride-along. During this time, you can ask to visit a few job sites, tour the factory, or watch the store during normal hours. They may ask for you to have a simple alibi so as not to spook the employees or customers, but if they believe you’re genuine and serious, they’ll likely say yes.

8. Compare and contrast

We find that the best buyers review at least three opportunities within an industry. This gives them a chance to get comfortable reviewing the financials during due diligence, chatting with owners, and understanding the pros and cons of different opportunities.

9. Include at least 10% of seller financing

When it comes to submitting an offer, we encourage operators to ask the seller to consider seller financing at least 10% of the transaction. We recommend that you ask for at least 10% seller financing. This ensures that the owner has enough skin-in-the-game to help you get off to the races.

10. Invest in the transition period

We cannot recommend investing enough in this transition period. Buyers who hit the ground running the fastest are those who created a structured transition plan to learn the ins and outs of the business.

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