e are in a nationwide generational shift. For every business owner diligently preparing a succession plan, there is another one who decides, “I want to sell everything and retire.”

The idea of being next in line to own and operate an established business might seem abstract now, but it’s becoming a realistic opportunity for a new wave of dedicated and talented employees across all industries.

Learn how you can prepare and what it could take to capitalize on the opportunity to own your own business.

• Make sound personal financial decisions: Have you established a good credit history? Do you have emergency savings? Are you prepared to contribute your own capital if an investment opportunity arises?
• Follow your passion: Are you enthusiastic about your work? Do you have the desire to continue learning and advancing within your industry? Are you ready to make the transition from employee to employer?
• Know your resources: Do you have a good support network of friends and colleagues with whom you can collaborate or go to for advice? Could you step outside of your comfort zone and consult subject matter experts such as an attorney, certified public accountant, banker, or human resources professional when needed?

• Cash Purchase: This could be through personal savings, equity from a home, or a loan from a family member.
• Seller/Owner Financing: In some situations, the seller will agree to finance your business purchase. This could be beneficial for their estate or tax planning if they want to realize only some of the income from the sale upfront or if they feel that the income stream from loaning the money would be better than the returns they might earn by investing that money elsewhere. Often, seller financing can be formalized with an “escrow” managed by a third party such as a bank. When combined with other options, such as a conventional bank loan, seller-financing is frequently viewed favorably. By accepting payment over time, the prior business owner demonstrates confidence in the business’s future success.
• Conventional Bank Loan: This would be a traditional loan directly from a bank. For a business acquisition, a conventional bank loan is more common when tangible assets are involved (like real estate) versus intangible assets (like goodwill or intellectual property). A typical bank loan would involve a 20% to 30% down payment depending on the collateral (tangible assets being pledged) and require the loan recipient’s personal guaranty. As mentioned, a conventional bank loan can be used in conjunction with seller/owner financing.

• Government Guaranteed Bank Loan: Utilizing a Small Business Administration, or SBA, guaranty is an excellent way for a bank to mitigate the risk of lending, particularly for a new business owner or a scenario that offers little tangible collateral. SBA programs often allow for lower down payments ranging from 10% to 15%, which can be beneficial. However, be aware that you may be required to offer your personal assets (such as your home) as additional collateral.
• Taking on an equity partner: Some individuals are willing to provide financing or equity contributions to your project. This option should be weighed carefully. It could limit your ability to make decisions, depending on how much ownership of the business you are willing to forego. The benefits would include decreasing the amount of capital you personally need to bring to the table, as well as potentially spreading some of the business risk. It’s important to consult with a subject matter expert, such as an attorney or business management consultant, to evaluate the various scenarios.

Wherever the business road takes you, good luck seizing the opportunity.