The Third Key Aspect of Business Acquisition: Financing
Future business buyers, be warned: You won’t find a miracle solution or a one-size-fits-all answer here. Every case is unique and must be considered as such. However, BestValue offers you a method to help guide your thinking… Let’s break it down.
When preparing for a business acquisition, financing is a crucial aspect that cannot be overlooked. Beyond the loan that a bank may grant you and any additional support from investors, part of the purchase must be financed with your funds. In theory, there is no strict minimum required. However, the amount you invest should be proportional to the value of the business you are looking to acquire. It is generally accepted that this amount should be around 30% of the total price, though this may vary depending on the specific characteristics of the deal. Similarly, depending on your motivation and skills, the financial aspect may be approached with some flexibility.
The real question is: How much are you willing to commit to your purchase? Before making a decision, it is essential to recognize that whatever amount you invest will be “locked in” for several years. Are you sure you won’t need that money for something else? What happens if problems arise? Do you have financial reserves? In the worst-case scenario, are you prepared to potentially lose the amount invested?
These are all critical questions that should be carefully considered as part of your decision-making process…