[rstocker99]

kareemm has already answered the questions about financing but I actually think your second question about "where to find these deals" is really the more interesting and important question. The obvious answer is places like FE where we found Codetree but that was a total fluke and it's not the right way to approach it.

The truth of the matter is that many business are for sale if you ask. The right approach is to think about the type of business you want to buy, build a list of all of the ones that fit and to cold email them and see if they'd be interested in selling. Basically the same approach you'd take if you were trying to sell B2B software i.e. Predictable Revenue style.

I can already hear people saying, "No way people don't do that" or "That would never work" but it does and people do. In fact we know a number of people that bought their businesses using that approach and it is exactly what we were about to start doing before Codetree fell in our laps. It's also the way that a lot of PE, VC and search fund deals get done.

[ryandrake]

I'd bet cold-E-mailing could actually work, but how do you find comps to guesstimate the cost of the business if it's not for sale and not much is known about it. I could imagine E-mailing CLOSELY_HELD_SMALL_PROJECT I think I could run better and getting back, "Sure, I'll sell. We generate $5M in FCF and I'd take 3X that!". Me: Uhhhhh, aww shit.

[rch]

Remember that an offer to buy is also a sales pitch, after a fashion. Unsolicited offers start to come in almost as soon as you feel like you have room to breathe.

[standeven]

Do your due diligence with financial statements. Any business will file taxes and any corporation will additionally have income statements, balance sheets, etc.

[ryandrake]

To clarify, I'm asking what are some clever ways to ballpark what a company's financials might be, to pre-screen out ones out of my league before I even contact them. Most companies don't publish anything about their finances at all.

[rstocker99]

Unfortunately, I don't think you're going to find a good way to ballpark their financials without them supplying them. It's common in the cold email to say something like, "Our sweet spot is companies with an EBIT of $X-$Y". So the person you're contacting knows if they are too big or too small.

For deals of this size you can also look for smoke signals e.g. you're looking to buy something for 200k-300k in EBIT and you go to their about page and find 50 employees you're probably barking up the wrong tree.

It's also worth pointing out that you're looking for one person to say yes. If you hit on folks that aren't a fit and never email you back or laugh you away so what. That's the nature of the game. You just need one.

[btown]

No different than doing B2B sales and emailing a prospect that is 10x bigger than you expected and only buys IBM and Oracle. A failure to penetrate a single prospect just means you move on to the next one.

[pcunite]

Exactly this. I want to present my business as being available for sale. However, it is difficult to start this dialog on HN because people seem to find it spamming to bring the subject up. HN could be more hospitable to finding these types of deals. Maybe a new section?

[rstocker99]

For sure. As a seller I think services like FE make a lot of sense. They have relationships with a lot of potential buyers to put your business in front of. Unless you're well connected it's going to be a lot harder to drum up buyers on your own. As a seller what you want is an auction where multiple buyers are competing to buy your business.

As a buyer that's the last thing you want because it drives the price up. See point 6: http://www.berkshirehathaway.com/2000ar/acq.html.