If you have decided that you don’t want to start a business from scratch, and that buying an existing business is for you, there are a few things to consider that may or may not occur to the first time business buyer:

Location-specific problems

Many small businesses end up on the market because of personal reasons related to the owner, like retirement or a family illness. If businesses you are considering are on the market for another reason make sure the reason is not an emerging threat in the area. A large competitor moving in or a change in traffic patterns that will be very disruptive to business are reasons to perhaps forgo this business and find another one.

Reputation

This issue is simple to address in the age of internet reviews and social media. Make sure you do your homework on any business you are considering. If you do find out the business has a bad reputation, it may not necessarily be a bad thing. For instance, a restaurant with a reputation for bad service can easily be rebranded and outfitted with a new and more customer-friendly staff. If you discover a bad reputation, try to determine if it is something that can be amended with rebranding or changes you are able to make.

Liabilities

As a new owner, you don’t want to be surprised your first week with unknown liabilities. When you buy a business, you inherit more than just the equipment and inventory. Any liabilities left by the old owner will now be your problem. Any debts, unpaid taxes, and impending lawsuits will end up on your plate if you don’t find out about them beforehand. This can easily be avoided if you are thorough during the due diligence phase. Ask your business broker for help with discovering any and all liabilities during due diligence.

The message here is simple. When entering into business ownership, you will need to make sure you have all of your bases covered. Use the due diligence phase and the expertise of your business broker to be completely and totally thorough in your examination of any business- long before you are handed the keys.

Are you looking for a business to buy, but have concerns with the businesses you have found so far? Please feel free to leave us a comment or question here, and we will be happy to help you on your journey to business ownership.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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During the recent economic downturn, many aspects of our economic climate have been likened to the Great Depression.  When looking to purchase a business, one truth of that time long ago still stands, cash is king.

If you are able to pay for the majority of your new business with cash, you will be a highly desired buyer in whatever industry you choose. If you have the ability to purchase a business outright, you will have a great deal of leverage in any business purchase transaction.

If you have a decent amount of cash, but not the entire amount that you need, the economic climate can actually give you better financing options in the form of seller financing.

Lending institutions are hesitant to lend money, so business sellers have the choice to wait for a buyer with all of the cash, or offer seller financing.

Seller financing might offer lower interest rates and a longer period to pay back the loan, especially if the seller knows that they will be getting a good deal of cash up front.

Try to only finance a small portion of the purchase price, as this will set you up for success down the road.  A smaller amount of debt will lead to less pressure and the ability to focus on growing your business instead of just keeping it afloat.

Are you a buyer with some cash who is interested in learning more about seller financing? Leave us a comment or question, and we will be happy to answer any questions you might have.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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When the owner of a franchise has decided to put his business up for sale, you could get the advantages that come with both running a franchise and buying a business.

If you purchase a franchise instead of a traditional small business, you get to run your own business while using the brand energy, advertising/marketing power, and the administrative and technical assistance of an established franchisor.

Looking for quick profits?

If you are acquiring an established franchise, then not only do you have the company brand and other systems in place; the entire business is already running, ready to go. You won’t have to wait for leases, build-outs, new equipment delivery and installation, etc. (though you do have to sign a franchise agreement).

That is not to say, on the other hand, that resale buying is a quick process. Like any major purchase, going through all of the business transaction and legal procedures can make it a time consuming enterprise.

When the closing day comes, however, you will be inheriting a business with an established presence. This will hopefully translate into quick operating profits because of the already established location and customers. This is unlike opening a new business where prospective customers would have to become aware of the new business.

This will be significantly easier if you are opening a well-known franchise, where you know brand knowledge will likely bring in customers right away.

Another plus to purchasing an existing franchise is you will also inherit a fully-trained staff. This will save you valuable time and energy that you may have had to spend recruiting and training new employees.

The benefits of inheriting an up-and-running franchise need to be analyzed, however, in the due diligence phase of the business transaction. For a smooth transition, be sure to look for a franchise that has a fully trained staff, a well established and positive reputation, and a fully equipped location.

After you uncover any issues during due diligence, you will have the opportunity to renegotiate the terms of the sale based upon what you find. If you discover aspects that may hurt your bottom line, you may be able to renegotiate your costs.

Should you be concerned that a franchise is up for sale? Does this mean that business is down and the current owner is trying to get out before the ship completely sinks? The answer to both is probably not. There are many reasons why any business owner decides to sell, and they can range from going into retirement to just wanting to start a new business venture. It is important for you as a prospective owner to figure out the real reason the current owner has decided to sell during due diligence.

Purchasing an existing franchise may be the right path for you because it will allow you to hit the ground running. Just be sure that you use your due diligence period and the services and knowledge of your business broker when deciding whether or not to go ahead and close the deal.

Are you interested in purchasing an existing franchise, but have questions about how the process works? Please feel free to leave us a question or comment here, and we will be happy to get back to you.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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If you are a prospective buyer looking to own you own business, you may have already noticed the unique nature of business listing prices- they seem to be all over the place.

How do you as a buyer interpret the asking price of a business as it relates to its actual value (which is basically what a buyer is really willing to pay for it)?

What follows are a few characteristics of a business that can greatly impact the value to you as a buyer, so be sure to look for them:

Consistent Numbers

If a business has very consistent numbers, it might mean less risk for a buyer. Remember that the value of a business to you is the earnings it will have in the future.

Operating Profits

In order for you to pay yourself and pay back any debt you incurred in the purchase of the business the business will need to be generating operating profits. A business who’s numbers consistently show operating profits will be a better bet than a business that is only breaking even.

Diverse Customer Base

In a business that has a diverse customer base (meaning even the largest customer only holds a small percentage of what the business earns) the loss of a customer will not be as fatal as in a business with only a small handful of clients.

Reputation and Brand

A business with a great reputation or a very well established brand will have a more loyal clientele, meaning less work for you as the new owner regarding building a customer base.

Good Managers

If a business is well managed by the management staff without the owner having to be present 100% of the time, and if those managers are willing to stay on if the business changes hands, it can be a good sign for a potential buyer.

If you need help determining if the listing price of a business really fits with an actual evaluation of the business, you can also turn to the services of your business broker, as they will know the current market and what aspects of a business bring the most to a new owner.

Are you a future business buyer who has questions about the value of businesses you have seen for sale? Leave us a comment or question here and we will be happy to assist you in your business search.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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The first question to ask is “Are you really ready to purchase a business?” The answer will depend on one main aspect- finances. Do you have the money you will need for at least a down payment already in place? If you are looking to expedite the business purchase process, it is typical that the larger the down payment you have, the faster you will be able to make a business acquisition. Fifty percent of the purchase price is ideal, although business transactions do close with smaller down payments. The reason for a large down payment is to give confidence to the seller. If you are not offering a full price payment, the seller will likely be giving you some kind of seller financing package. A seller wants to know that you will be able to make loan payments, and a reasonable down payment is the first step to creating this trust.

Once you have your down payment in place it generally takes about six months to acquire a profitable and solid business. Remember that six months is an average, and the timing will greatly depend on what specifics and locations you are looking for. You will need to give these desired details to your business broker in order to expedite the process as well.

A key to success in business ownership is practical experience. A common misconception is anyone can run any type of business, as long as they own it. Nothing could be farther from the truth. You must have relevant experience if you want to be able to compete in the market you are entering. Talk to your business broker about the areas where you have expertise so they can match you with an appropriate business.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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If you are a first-time entrepreneur, the lure of business ownership may have you thinking about starting your own business from scratch. Although it is possible to start a new business and succeed on your very first try, only 1 in 5 new businesses will make it past their five year anniversary.

Why is this the case? There are a number of reasons. The initial cost involved in a start-up is usually much more than anticipated, and this often leaves an owner cash-poor before the doors even open. Another common problem is overexpansion long before the business is ready, which can put a great deal of financial strain on the business. The most likely cause of start-up failure is the inexperience of the owner. If you have never run a business before, trying to put in place a location, equipment and furnishings, operating procedures, and an inventory can be really tough.

If you are intimidated by the chance of failure right out of the gate, there is another option for your road to entrepreneurship. You can buy an existing business. As a first-time business owner, this option means that your business comes ready-made. Businesses often come with an inventory, have a fully equipped and furnished location, and operating procedures that are successful. In many cases the current owner will agree to stay on for a time after the business is sold in order to give you training.

It is important to remember that any business venture comes with a certain amount of risk. As a prospective business start-up or potential business buyer, you will need to decide which road (and risks) you are willing to take on.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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