How to Buy a Business That Is Not for Sale

Buying a small business that’s not for sale sounds like a contradiction in terms, but you might be surprised how many deals are completed off-market. Statistics suggest up to 80% of businesses sell without being advertised.

There are all sorts of reasons business owners choose not to advertise their businesses for sale, such as they don’t want it to be widely known they are selling, they have someone in mind to sell to, and they had no firm plans to sell until someone pushed them to think about it.

Let’s dive deeper into this, because there are clearly a lot of opportunities here for savvy entrepreneurs.

Why would you buy a business that is not for sale?

There are several reasons for buying a business that’s not for sale. First and foremost, and this applies to buying any business, is that buying an established business is a less risky option than a start-up. Next, once a business is for sale, there is the danger of a number of prospective buyers coming forward. Competition can push up the price and reduce the chances of you being successful in your bid. Thirdly, the current owner avoids having to pay fees to business brokers and for advertising, and that can be to your advantage as those costs now don’t have to be covered by the purchase price.

Finding a business to buy that is not for sale

There are a number of ways to find businesses off-market, from putting the word out that you’re looking for a business opportunity to targeting business owners direct.

Identify Potential Sellers

How do you identify potential sellers? Target appropriate businesses in your sector, or put the word out widely and get people to self-select at a stage in the process.

You can use a variety of messages, aimed at small business owners who might want to sell due to retirement, illness, relocation, or simply a loss of interest in the business. Very often when a business is run-down it’s because the owner is fed up.

You are ideally looking for an owner who wants to sell but hasn’t yet advertised their business for sale, so reaching out to them is an effective way to get your new business.

Utilise Your Network

Your personal network – friends, family, and business acquaintances – can be leveraged to find people interested in selling their business. This is unlikely to get you a business sale overnight, it’s a slow burn, but if you ask enough people and get the word out far and wide, sellers will approach you. That’s a good dynamic, it puts you in a strong position.

Leverage Social Media and Online Communities

Post on social media platforms such as LinkedIn, Facebook and Twitter to let people know you are actively looking for established businesses to buy. Encourage followers and friends to share posts, which increases your reach.

If you post in sector-specific or otherwise relevant groups, make sure you follow the rules – some only allow ads one day a week, for example.

You can also use digital display ads on platforms such as LinkedIn, Google and Facebook to attract the interest of willing sellers. Having a website or landing page to direct them to is useful here, and it can be used to encourage people to self-select based on your stated criteria.

Attend Industry Events and Trade Shows

Industry-specific events and trade shows that cater to your target sector are opportunities to get face-to-face with business owners who might be thinking about selling. Let them know you’re interested in buying, and make sure you swap contact details.

Monitor Local Business News

Keeping an eye on local news can alert prospective business buyers to potential business-buying opportunities. Business development activity, personal stories about business owners, and changes in regulations are just some of the types of things that might make it worthwhile making contact with small business owners and enquiring whether they are thinking about selling.

Build Relationships with Local Professionals

Professionals such as accountants and solicitors can be good sources of information when you are looking for owners thinking about selling. They often have first-hand information and are happy to sound out contacts and make introductions. They also have networks of their own they can tap into.

As well as making sure your own accountant and solicitor – and any contacts you have at banks or financial services companies – know you are looking to buy, aim to cultivate more, similar, contacts. Joining your local Chamber of Commerce or any business networking groups can be useful here.

How to approach business owners to buy their business

The three main ways of approaching a business owner are by phone, email or post, and one of these methods stands out head and shoulders above the rest.

Direct Outreach

The best way to make contact in the first instance is to send a letter through the post. Yes, it’s old-fashioned by some standards, but it has advantages. It’s not intrusive, like a telephone call can be; people can read and consider at their leisure. It shows that more work and effort has gone into the contact compared with just firing off an email. And people don’t get as much post as they used to, so provided it’s properly presented it will stand out from the junk mail we all get.

Effective Letter Campaign

When you are planning a letter campaign, there are four basic steps to take:

1. Have a clear target market: think about the type of business(es) you want to buy, such as, for example, dental practices, hairdressers or hardware stores. Being focused can pay off better than taking a scattergun approach.

2. Write a professional letter: take your time over it, and if writing isn’t your forte, hire a copywriter to do the job for you. Introduce yourself and ask if the owner is interested in selling. Set it out nicely on the page and make sure it both reads well and looks appealing.

3. Obtain names and addresses of target business owners: the easiest way to do this is to buy a list from a broker. Tell them your requirement parameters and they will provide you with the details you need.

4. Use a professional mailing service: if you are sending a lot of letters – and you ideally should be – then get a mailing house to handle it for you. The convenience will far outweigh the cost.

If you approach people in your target market in the right way, people will phone you. And remember, you are looking for motivated sellers with a good business willing to do a deal at your price and on your terms.

Offer to Solve Problems

By buying someone’s small business you might be solving their biggest problem! If they or a family member is ill, they might need cash and time. If they are looking to retire, or move abroad, or want to clear their mortgage, selling their business could provide that freedom. If new ideas and/or cash flow are needed for an existing business to move to the next level, or regulations are becoming onerous so everything feels like too much hard work, then you taking those problems away by buying the business might be a welcome development.

This can also help you to negotiate seller financing, and depending on the circumstances, agree a smaller upfront payment.

Tips on buying a business that isn’t for sale

Use some of the ways explained to reach out to people ready to sell but who haven’t yet advertised their business for sale.

No matter how you first make contact, aim to move things to a face-to-face meeting as soon as possible. They already want to sell – now you need to make them want to sell to you.

Build trust and rapport. Stress how selling to you will solve their immediate problem. Ideally, encourage them to see that you are doing them a favour by buying the business. ‘You want to spend time abroad with your family? Once I buy your business you’ll have the freedom to do that.’

Even if you believe you have found the right business for you at the right price, do your due diligence before finalising the business purchase. Check the financial statements: balance sheets, profit and loss, and cash flow statements. Confirm the business valuation supports the asking price. Find out if there are assets such as real estate that can be used as collateral for bank loans. If the customer base is BtoB, see if it can be leveraged for a business loan. Understand the liabilities in the business.

No matter what kind of business you buy, you need to do this before you draft the sale agreement. Be prepared to sign a non-disclosure agreement to get access to the figures.

Hire a Business Consultant or Adviser

Just as you would get a list broker to help you identify target businesses and use a mailing house to get your letters out, you have the option of hiring a professional with experience in mergers and acquisitions to help identify off-market opportunities. You can enlist professional advice right at the outset or draw on their expertise later if you feel you are getting nowhere fast under your own steam.

Don’t necessarily rule out franchises; existing franchisors can be useful sources of advice and information.

Create a Professional Website

It can be useful to have a website – or at least a landing page – that you can direct people to, or that they might stumble across. Make sure it looks professional for best results. Set out what you are looking for, and perhaps also what you don’t want; this will encourage people to self-select at this point and should mean you don’t get bogged down with inappropriate enquiries via the website.

Persistence and Patience

It’s possible you will meet someone at your first networking event or get a call from your first mailing that results in a business acquisition – but don’t count on it. Be prepared for a longer-term campaign. Some of these activities are a slow burn. That said, persistence pays off, so don’t be disheartened if it feels like nothing is going on. All sorts could be happening behind the scenes, so be patient.

You can use the time to complete any preparation you can get on with. Explore financing options, make a start on your business plan.

Case study – James Gardner

Dealmaker James Gardner bought a profitable business that wasn’t for sale. Despite having twenty years of business experience, attending a special Dealmaker’s Academy seminar in Amsterdam, and receiving mentoring from Jonathan Jay, James was apprehensive about approaching the owner. But he did it, and it paid off in spades.

Regarding the initial enquiry, he says, ‘I was polite; I was professional. I wasn’t aggressive; that’s not my nature.’ That led to the deal being completed within five months, despite the odd hiccup. Read the full story here.

Conclusion

When you are doing something important, especially for the first time, it can be daunting. You don’t know how to do some things, or how to be sure they have been done right. Before you become the new owner of your target business, you need to conduct due diligence, negotiate with the lender, agree the down payment, and so much more.

It can be a huge bonus to have someone with years of experience in business mergers and acquisitions on your side. Jonathan Jay has helped more than 3,000 people buy successful businesses and become acquisition entrepreneurs, and he has put together the most comprehensive FREE package of business buying resources available today. To get started on your acquisitions journey, download your FREE Business Buying Toolkit now.