Ruback Richard S. - HBR Guide to Buying a Small Business

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HBR Guide to Buying a Small Business

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Richard S. Ruback
Royce Yudkoff

HARVARD BUSINESS REVIEW PRESS

Boston, Massachusetts

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ISBN: 978-1-63369-250-3

eISBN:978-1-63369-251-0

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You can buy a small businessright nowand run it as CEO.

An attractive professional path that combines financial rewards with a flexible and fulfilling career.

What it takes, and who does it well.

An overview.

How much youll spend depends on specific choices you make.

Raising capital to fund your effort.

Look for a business that is established and enduringly profitable that you have the skills to manage.

Juggling sourcing opportunities and filtering prospects.

Focus on companies that are explicitly for sale.

Finding prospects on your own.

The key is recurring customers.

A few simple calculations that tell you a lot about a business.

How to avoid sellers who abandon the sales process after months of your time and money.

Learn more about the company and begin building a financial projection.

The art of small business valuation.

Deal structure, financing, timing, and other fundamental points.

Take the big step with a letter of intent.

Cross-check what you (think you) know about the company.

How to get a small business loan.

Finding the right equity investors for your deal.

Defining essential deal terms.

The transition to ownership.

This book takes a big idea from our popular courses at the Harvard Business School and for the first time shares it beyond campus. The big idea is that you can buy an existing small business, right now, and run it as a CEO. Each year, we teach hundreds of MBA students about this kind of entrepreneurship, and dozens of them follow this path immediately after graduation.

About five years ago, we developed a course on small businesses to fill what we saw as a gap in the schools offerings. We chose to study small businesses because it allowed us to apply our skills and experience to a vital segment of the economy that we believe should get more attention especially from entrepreneurially minded men and women who can become owners and managers of these companies.

We became even more fascinated with smaller businesses the more we learned about them. Our students became engrossed as well; last year, every seat in the courses we offered was filled. And the number of students who go on to buy a small business directly after graduation continues to rapidly grow each year. We are not surprised: These businesses give our students the opportunity to be leaders early in their careers, to apply their common sense and their general management expertise, and to fashion a work environment that meets their goals.

While our primary interest in small businesses is in teaching and research, we have also become investors in some of the businesses our former students have acquired, including some of those described in this book. Weve put our money into these opportunities because we are enthusiastic and confident about the potential of entrepreneurship through acquisition and because weve been excited to see so many individuals succeedon so many levelswhen they decide to follow this challenging, often tortuous, often fun, and always exciting path.

As weve seen the demand for our course increase, we wrote this book to bring the idea to a wider audience, beyond the walls of our classroom, and to guide you through the process of buying a small business. We hope that many of you find the idea as compelling as our students doand as we ourselves doand that you find success in pursuing one of the many unique opportunities available in this little-known market.

This part of the book introduces you to the opportunity to become an owner and a CEO of a successful existing business. In , The Acquisition Process, we give you an overview of what to expect when you are searching for and purchasing a smaller businesssteps that we will revisit in more detail in the remaining parts of this book.

If you are a manager thinking about making a change in your career or a newly minted MBA looking to begin a management career, this is an opportunity you should consider: You can buy an existing business, right now, and run it as CEO. We call this entrepreneurship through acquisition, and through our work teaching and researching the subject at Harvard Business School, we have seen many professionals find it an intriguing and rewarding alternative to a more traditional job.