In my early days as an entrepreneur, I bought into the traditional ‘success’ paradigm: start a business, work hard, and make money. It’s a paradigm that tens of thousands, if not millions, of other entrepreneurs worldwide still embrace.

But my outlook changed 20 years ago when I was able to purchase a telecoms business without risking any capital or taking on debt. I grew that new business with the equivalent of 12 month’s sales in a single afternoon. This buyout shattered the paradigm and made me question the time I was still investing in traditional organic growth compared to the value creation from simply ‘doing a deal’.

That first business acquisition had occurred by accident, or perhaps more accurately through a happy set of coincidence. But it showed me what was possible. The owner of that business wanted just £15,000 for the entire company; it had 600 customers with 1,000 active phone lines and had been active for 13 years. It was, however, a burden to the owner.

The business was having major issues with their main supplier and faced the imminent prospect of having to relocate to a new office because the landlord had sold the land for residential redevelopment. On top of this the owner was making far more money through a second business operating in the real estate sector, so from his perspective, it would be a relief to offload the company.

Though at the time I didn’t have £15,000 of my own money to buy it or to invest in its future, I did have a solid negotiating position and was able to get the deal done. I agreed to take the business off his hands and pay the owner the £15,000 over the space of a year. That revenue came from the business itself, so it was ultimately self-financing. It was an accidental stroke of luck, or bad luck from the seller’s perspective, that is to thank for the acquisition but this perfect storm of motivations taught me a great deal about how to do smarter deals.

These are the key lessons I learned from that first deal:

Deals are to be found everywhere…but you do have look

When I first began attending networking events, I concentrated my search on customers. After the telecoms company deal, I decided to instead hunt for potential companies I could buy. I chatted to business owners and the most amazing, and often unlikely, opportunities arose. I elevated the conversation from ‘hunter/salesman’ to ‘sophisticated business owner’ and the resulting opportunities were incredible, including the deal I mentioned above.

Don’t pay for a company up-front

Most of the risk when you buy a limited liability company lies in handing over your money to the old owner. The simplest way to mitigate risk is to not pay for it up front. If your downside is covered, you only have upside left. You can also do much of the legal work yourself, thereby saving thousands of pounds in solicitor fees.

Don’t look for companies for sale

Focus on a sector you want to target and just talk to the business owners about their future plans, succession, issues they are facing, and why selling some or all of their business to you could solve some of their biggest problems.

Seek out only on motivated owners

Many business owners are limping along and have little drive, ambition or eagerness to sell. If a business owner is not motivated to sell up, regardless of a company’s poor revenue or other problems, walk away and find someone else.

Bargain hard

The market for buying small businesses (SMEs with £500,000 to £5million revenue) is relatively small. As such, few ever receive offers from prospective buyers. What’s more, some 70 per cent of SMEs are owned by baby boomers coming to retirement age and – in many cases – looking for an exit strategy. With this in mind, remember that you’re in a strong position to negotiate; your offer could be the only one they’ve ever received and are ever likely to receive. Why invest your time and capital into starting a new business when there are plenty of established companies on offer? Remember that “You don’t have to run the marathon, you can just run the last 10 yards and they still give you a medal”.

A deal is not about price but about structure

Structure the transaction to avoid exposing your capital upfront. Instead strike a compromise with the vendor that enables him/her to exit If you’re looking to buy a distressed company, the vendor’s biggest concern could be what to do with it. In either scenario, the key to making a deal is to find the vendor’s itch…and scratch it.

Buy direct

Purchasing businesses online, from any number of ‘business sales’ websites, is a fool’s game. In my experience, many of the companies up for sale have been listed with grossly-inflated turnovers and net profits. Moreover, their sale price is rarely (if ever) worthwhile. This is because such websites are typically operated by brokers with their own revenue agenda. There’s virtually no interaction between owner and vendor and no opportunity to negotiate.

Owner managed deals, on the other hand, are far better. They are by definition more flexible in that they require (and rely on) parties speaking, discussing and compromising on their respective positions.

There’s clearly more to buying a business that these seven steps but I hope they will provide you with a practical starting point on which to build. You can obtain lots of free advice and additional content – such as articles, numerous videos, and a free report – on the harbourclubevents.com website.

Jeremy Harbour is a global leader in the field of small business mergers and acquisitions and the founder of The Unity Group and The Harbour Club. He lectures globally on M&As, is an Advisory Director for the Mint National Bank, and a DBS Business Class advisor. Jeremy was named the Coutts Entrepreneur of the Year runner-up three times and has advised Buckingham Palace, Parliament and The Princes Trust (among many others) on matters of business and enterprise.