should i buy or start a business Archives - Infinity Business Brokers

Published November 6, 2023

The first question on any entrepreneurial journey is a big one. Is it better to buy an existing/operating business or should you choose to start one instead? The short answer? Buying an existing business is typically the better path.

Why?

An existing business has a history that you can examine.

If you start a business from the ground up, there is no way to know what the track record will be. If you are fortunate, the record will be good. If you aren’t, you probably won’t be around long. An existing business removes a bit of this risk by having financial records that you can examine closely prior to purchasing the business. An existing business also has a proven location and comes with an already established customer base.

Another plus to getting a business with records? As you go through the numbers you may find new business growth ideas, unused niches or overlooked areas that could be streamlined.

An existing business has cash flow.

New businesses fail when new business owners don’t take into account the period of time, typically 12 to 18 months, between opening the doors and when the business will actually start generating a profit. Many new businesses go under because they have no cash left after getting to the grand opening – they end up running on fumes and having to shut the doors before anyone even knows the business is there.

An existing business is already generating income. Even if you will need to find financing for operating expenses, there is no need to guess how much money you will need and how much you will be able to pay back because you already know what cash flow the business currently generates.

An existing business comes with someone to show you the ropes.

When an existing business is sold, there is usually a training and/or consulting period written into the contract. This ensures that the new owner gets the proper training to keep the business up and running.

If you start your own business, you will be going it alone. Although there might be business owners who are willing to give you advice, you won’t have someone to show you exactly what works (and more importantly what doesn’t work) for those critical first few weeks of ownership.

It is typically easier to get financing for an existing business.

It is fairly common in the sale of small businesses that the owner will offer seller financing. This is great for a new entrepreneur for two reasons. First, it says a lot about a business that the current owner has enough confidence in the business model to take payments over time. By offering seller financing, they will be dependent on the continued success of the business for years to come. Second, traditional sources of financing can be very hard to come by. For a buyer who can’t pay all cash up front, seller financing allows for the purchase of a business with just a sizable down payment.

For all the reasons above and more, deciding to buy an existing business will likely put you in a profitable position much sooner and with less risk than creating a business from scratch.

Have you ever started a business and wished that you had just bought one that was already established? Do you have questions about the success rates of existing businesses once they change ownership compared with the success rates of start-ups? Ask us! Leave us a comment or question here and we will be happy to help.

Michael Monnot

4 Ways: How To Finance The Purchase Of A Business

Published June 19, 2023

Coming up with a brand new business idea is a big challenge. You have to figure out a concept, find a location, come up with operating procedures, hire and train a staff, build out your space – the list is a long one.

If you’ve ever wanted to own your own business there’s a way to do so without having to start at ground level. You can buy an existing business instead – one that has a proven location, concept and track record.

If this sounds like it might be the right path for you, here’s your next question.

How are you going to pay for it?

In the small business world there are essentially 4 ways to finance the purchase of a business. Let’s take a look at your options:

Seller Financing

This one is probably the most common. A buyer comes up with a substantial down payment and then the seller of the business finances the rest. This option is popular because small business funding can be difficult to get from a traditional lending institutions like a bank, so sellers will offer creative financing to open up the pool of buyers for their business. This is also popular among buyers because a seller who is willing to keep some skin in the game tells you volumes about how they view the future profitability of their business. They don’t get paid unless you succeed. A few caveats for this financing option. You will need to bring a large down payment, 10 or 15% isn’t going to cut it. Also, if you do end up defaulting on this loan the seller will get the business back.

SBA Loan

The Small Business Association (SBA) does offer loans in the right situation to people buying a small business. There will be a fair share of bureaucracy with this financing option, as well as certain metrics both the buyer and the business itself will have to meet in order for the loan to happen.

Investor/Family Funds

In some situations a buyer is able to procure funds from loans made by family, friends or investors. This option should include a contract or written agreement by all parties that spells out every aspect of the loan – how it will be paid back, what metrics are necessary, how one or more parties can be bought out of the agreement should the need arise, etc.

Your Own Cash

Lastly, you can always use your own cash to fund the purchase of a business. Perhaps you have a decent amount of money in savings, maybe you’re considering refinancing your home or pulling funds out of investment accounts. This option will alleviate you from owing money to others but must be considered carefully if you are going to be investing all of your available cash into the purchase of a business.

If one or more of these financing options seem doable for you, the next step you should take is to have a conversation with an experienced and qualified business broker. They will be able to talk you through the options available to you and help you decide which option will best meet your goals for business ownership.

Have you always wanted to own your own business but weren’t sure how you would fund such an endeavor? Would you like to know more about how seller financing works? Do you have questions about the process required for a loan from the SBA? Ask us! Leave any questions or comments here, we would be happy to help.

Michael Monnot

I Have A Business Idea: Should I Buy A Business Or Start One Instead?

Published June 12, 2023

If you want to own your own business there are basically two avenues to make that happen. You can start your own original business from the ground up or you can purchase an existing business. The path you choose will depend on many factors that relate to the risks involved in starting a business versus the risks for buying one.

In general it’s probably easier to buy an existing business. The concept, location and operating procedures are all proven because the business is currently open and running. The employees have already been hired and trained, the licensing and permits needed have already been approved, the inventory or goods for sale will work because they are currently selling – you get the idea. A tried and true method almost always works better than an unknown.

If it’s easier to buy a business, is it always a better choice than a start-up? No, it depends on what your vision for business ownership is.

You might be someone who just wants the flexibility and control business ownership affords you, and while you do have industries and types of businesses that would suit you in mind you aren’t stuck to one particular idea of how a business must be. Good financials, a good location, a good reputation – these are the things that matter to you. If your desire to be a business owner is born out of wanting to reach life goals but the path doesn’t need to be a certain way – purchasing an existing business is probably the right idea for you.

On the other hand if you have an entirely new business idea and the means to bring it to fruition coupled with needing that business to be exactly the way you envision it – a start-up is likely a better route.

A caveat to the start-up route. Say your dream is to open your own café to sell the baked goods from your grandmother’s recipes and coffee. Sure, you could find an empty commercial space and build it out to your liking – but you’ll have no idea if the location and concept are going to work. A likely safer bet is to find and purchase an existing café that is similar to what you envisioned and then make small changes (after you’ve run it for a while and have a gauge on what your current clientele will accept as far as changes) until it’s exactly the way you want it.

Whichever path you think might suit you a great first step is to have a conversation with an experienced and qualified business broker. They will be able to point you in the right direction, either by finding you listings that would suit your needs or by referring you to a commercial agent to find your new space.

Do you have a vision for business ownership and aren’t sure which path is right for you? Would you like to know what businesses currently for sale might work for your goals? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot

Interested Buying A Franchise? Let’s Talk New Vs. Existing

Published March 27, 2023

Buying into a franchise can be a great option for those who are looking to start their own business from the ground up. Starting your entrepreneurial journey with a franchise does not necessarily mean an easier path, it just means you walk in with an established brand and structure already in place. In terms of the time and money you will ultimately spend, buying into and starting a franchise will be just as much work as starting a business on your own.

What are the major expenses involved in starting a franchise?

The first cost you will incur will likely be the franchise fee. Franchises charge this upfront fee as a way of recouping the costs of training, branding and the support they will provide. The average franchise fee is somewhere in the neighborhood of $30,000, but they can range from less than $10,000 to over $100,000. The franchise fee will depend on the size of the franchise you are buying into, and each individual franchise will have specific requirements to become part of the brand.

There may also be costs related to setting up a location. You may have rent payments and may have to pay for things like landscaping. You may need to have signs made, install new equipment and fixtures, buy new furnishings, and build-out a space.

Any new business will also need to bring in an initial inventory and purchase supplies. There may also be operational needs like advertising and payroll, so you will need to be certain that after all of your starting costs are covered, there is still enough capital left to cover your additional expenses until you are able to turn a profit.

How can you be sure that you have enough to get your franchise up and running and keep it running until a profit starts coming in? Ask questions, lots of questions, during the buying process. You will need to have at least a general idea of how much time per week you will need to work, and how much income you can expect to bring in if all goes well.

Does starting your own franchise location sound a little daunting?

If you are looking for the benefits of owning a franchise without the risk of creating an unproven location, then perhaps buying an existing franchise location is for you. Like with the purchase of other existing businesses you will be getting a turn-key, currently operating business with everything from build-out, staff and operating procedures already in place. The difference with a franchise location is you will need to pay a franchise fee to join the brand – but if you are looking for a business with instant name recognition and a well defined structure already in place this might be the path for you. Ask your business broker about the costs versus benefits of buying an existing franchise location or starting one from scratch.

Does buying a franchise seem like the right path for you, but you have additional questions? Would you like to know what franchise locations are currently for sale in your target area? Ask us! Leave a question or comment here and we will be happy to help.

Michael Monnot

Should I Buy A Franchise Location Or Build One?

Published June 13, 2022

Why a franchise? If you’re considering franchise ownership you already know the answer. A franchise is an established brand. The concept is already proven, there’s an established customer base, operating procedures are laid out and functional, etc. There are costs and drawbacks to franchise ownership that you wouldn’t incur if you have your own unique small business, but for some business owners those costs and drawbacks are outweighed by the benefits of becoming a franchisee.

If you think franchise ownership is the right path for you – your first major question will be should you buy or should you build?

Here are some things to consider:

If you build out a new franchise location?

The first cost you will incur will likely be the franchise fee. Franchise companies charge this upfront fee as a way of recouping the costs of branding, training and the support they will provide. The average franchise fee is somewhere in the neighborhood of $30,000, but they can range from less than $10,000 to over $100,000. The franchise fee will depend on the size of the franchise you are buying into, and each individual franchise will have specific requirements to become part of the brand.

There will also be costs related to setting up a location. You will likely have to build out, furnish and equip a space while fulfilling franchise requirements. There will be costs associated with licensing and permitting. You may have to purchase a commercial property – or if you are going into a commercial space as a tenant, there will be costs associated with taking over the space, like rent and deposits.

Any new business will also need to bring in initial inventory and purchase supplies. There may also be operational costs like advertising and payroll, so you will need to be certain that after all the initial expenses of your build out are covered, there is still enough capital left to cover you until you are able to turn a profit.

If you buy an existing franchise location?

Buying an existing franchise location can be a great option for those who are looking to own their own business but don’t want to risk the massive amount of capital it takes to start a new location (without knowing if that location will be successful).

You will still need to meet the qualifications required of the particular franchise you are looking to buy, and there will be fees associated with becoming a franchisee. These fees and requirements will vary, so ask you business broker for the range of fees associated with a specific franchise. The benefit of buying an existing location is you will remove the additional costs of a build-out, initial inventory and permitting fees. You will also remove a good deal of the risk associated with starting a new franchise in an unproven location, as an existing location has the numbers to prove it has been successful.

Which path is right for you? It depends on the amount of capital you have available and the level of risk you are willing to incur. Talk to your business broker about your options and they will be able to help guide you on the best path for you.

Does buying a franchise seem like the right path for you, but you have additional questions? Do you have more questions about franchisee requirements? Ask us! Leave a question or comment here and we will be happy to help.

Michael Monnot

The Pros Of Buying An Existing Business

Published May 2, 2022

If you’ve dreamed of starting life as an entrepreneur then you’ve likely conjured images of the startup in your garage, endless hours and scrounging for capital while you work as hard as you can to get your business idea off the ground. While many a Fortune 500 company began this way, it isn’t the only path to entrepreneurship.

What’s another path? Buying an existing business.

Wait, people sell businesses? Yes, existing businesses are bought and sold every day. Sometimes it’s because an owner has reached retirement. Maybe they’ve decided to undertake a different venture. Perhaps there’s something in their life that has created a situation where they can no longer own and operate their business the way they’d like to.

In other cases a seller has reached a particular metric – maybe they bought a smaller business that needed new growth strategies and now the business is at the point where they’re ready to sell and start again with a new project.

Whatever the reason for the sale, there are great businesses on the market every day – businesses that would meet the goals you have for business ownership.

But I have a couple of my own business ideas, why should I consider buying an existing business instead? There are many benefits to buying an existing business that just don’t exist if you’re starting on your own.

What are the pros?

A proven concept. While you might have a great idea, it’s just that – an idea. It hasn’t been proven. This is why the failure rate of startup businesses is so high – sometimes a great idea just falls flat when it’s introduced to the world. With an existing business someone else has laid the groundwork for you. The fact that the business exists today means the concept works.

An existing customer base. Customers are the obvious life blood of a business, and with an existing business you will still have new customer acquisition as a priority – but you don’t have to start from square one. A loyal and established customer base exists the day you take over.

Better financing opportunities. Traditional lending institutions are very gun-shy about supporting start-ups. You’ll likely have a hard time getting funding. When you buy an existing business there tend to be better options for financing your purchase, like the Small Business Administration (SBA) or seller financing.

Immediate cash flow. When you start out on your own you end up spending a ton of money before you ever generate any kind of cash flow. When you buy an existing, operating business the cash flow is there the day you get the keys.

The message here is business ownership and an entrepreneurial life don’t have to start in your garage. You can buy an existing business and reap the benefits of someone else laying the groundwork for you.

Have you always wanted to start your own business but the idea seems too daunting? Would you like to know what businesses currently for sale could meet your goals for business ownership? Ask us, or search current business listings here! Leave any questions or comments and we would be happy to help.

Michael Monnot

The Garage Start Up? Why Buying A Business Is Better

Posted in Become a Business Owner, Business Broker Why & How, Buyers Articles

Published December 2, 2019

When you think about famous entrepreneurs, it often brings thoughts of a person who came up with an inspired idea and built a successful and thriving business from the ground up – with the romantic twist of doing so out of a garage with little to no seed money. While this may be the path for a few very driven and lucky individuals, the path for most entrepreneurs begins quite differently, with the purchase of an existing business.

Wait, what? Buy an already existing business? Why would I do that instead of starting my own business?

Typically, buying a business is a safer bet than building one from scratch. You get to take over as owner of an already built-out and proven location with trained employees and a ready-to-go set of operating procedures. This can be a great way to get into business ownership because it skips all of the disadvantages a start-up will encounter – like establishing a customer base, building cash flow, paying for build-outs, establishing marketing practices, training a brand-new staff, obtaining initial permits and licenses – to name just a few.

It is not, however, a fool-proof way to enter the world of business ownership. You need to choose a business that is profitable, or one that has easily-remedied issues that will make it profitable quickly. You need to choose a business that will fit with your goals for business ownership and one where you have some practical knowledge or experience. You also need to choose a business that has room for growth.

I have a lot of questions, who should I ask?

The smartest step any budding entrepreneur can make is to hire an experienced and qualified business broker. A broker will be a great asset, as they can help you find businesses that are right for you.

In your initial conversation with your broker you should talk about your previous work experience. You don’t want to have to learn a whole new industry at the same time you are learning how to operate a business. You should also talk about your goals for business ownership. Your goals will determine what industries would be best for you. For instance, buying a bar with the goal of having evenings off isn’t going to work. Be a bit opened minded about the businesses that are available – you might be surprised to find a business that perfectly fits your goals in an industry you would never have thought of on your own.

The message here is entrepreneurship isn’t an impossible goal, and you don’t have to come up with a genius idea in your garage to get there. There are a myriad of businesses available everyday, and with help from a good business broker you can find the right one for you.

Have you always wanted to own your own business, but were unsure of where to start? Do you have questions about what a business broker does? Ask us! Leave any questions or comments here, we would be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

If It Ain’t Broke – Important Advice For Business Buyers

Published June 24, 2019

The old adage you have to spend money to make money is absolutely true. Business owners have to invest in things like marketing and improvements in order to keep a business thriving and growing.

There is a far more important adage, however, that a new business owner needs to abide by.

That adage? If it ain’t broke, don’t fix it.

What do we mean by that?

When you envisioned your life as a business owner, you likely saw your business as something uniquely your own. Your own designs, ideas, concepts.

If you’ve decided to take the entrepreneurial plunge by buying an existing business, you have made a very smart choice because you don’t have to start from the ground up – you get a fully operational business with a proven location on day one. This removes the issues a start-up business would bring – like finding a location, build-outs, buying equipment and furnishings, getting permits, hiring a staff, creating operating procedures, painting, designing a sign – the list is enormous.

Getting your hands on an existing business means that while all of that initial work is finished, all of those initial decisions have been made by someone else – the previous owner. This can cause a business buyer to have issues with the aesthetic and/or operational aspects of their new business because it doesn’t exactly match the business they envisioned.

As a new business owner, you need to consider this part of buying a business. There will be some things that you don’t like about your new business and some things that you personally would have done differently.

Maybe you hate the paint colors. Maybe you think the ordering system is wildly archaic. Maybe you think the layout needs to be completely changed.

If you are having these thoughts about your new business – STOP. You bought an existing, operating business that generates cash flow. Every business is inherently complicated, so it would be very difficult – if not impossible – to ascertain what parts of the business work and what parts you can change on day one.

You might hate the paint colors, but maybe the rustic charm of the decor is what keeps the regulars coming back. You might not like the ordering system, but it is based on the vendors your business needs to survive. You might hate the layout, but it is the layout that creates the efficiency that keeps the business alive.

New business owners who are hung up on their own vision of what their business should be walk in on day one and immediately embark on a very expensive major renovation, rewrite the operating procedures and change all of the vendors and staff without taking the time to figure out why the business is successful. This always, always ends in complete disaster.

We aren’t saying you can’t change things. What we are saying is patience is the name of the game. Give yourself a few months to decide what works and what doesn’t, why the previous owner did things the way they did. Once you really understand the business as a whole, you can make small changes to slowly guide the business toward your vision.

Don’t fix what isn’t broken!

Are you thinking about buying a business, but haven’t seen anything that matches the vision you have for business ownership? Would you like to know more about how buying a business can be a better choice than starting from scratch? Please leave us any comments or questions and we would be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

The Reality Of A Dream – What Business Would Be Right For You?

Published June 10, 2019

Can your dream business actually make you happy?

Daydreams are fun, but daydreams about business ownership can turn into a nightmare when first-time business buyers try to force an unrealistic dream into reality.

What’s the most common daydream turned nightmare? Food service. Sure, you may have always thought it would be fun to run your own cafe or sit at the end of your own bar – but if you’ve ever watched the plethora of reality TV shows about restaurants or bars on the brink of failure – you may have noticed a common theme. The food service businesses in the most trouble were bought by people who had no idea what they were doing because they had never worked a day in the industry.

This is where it is important to confront your daydream with reality. Would you know what you were doing if you took over a bar tomorrow? What are you hoping to get from owning a cafe?

More financial freedom? A break from the 9 to 5 work schedule? The ability to love what you do for work? Probably, but here’s what you may not have considered.

Financial freedom is only going to come from a good deal of success in any industry, and that good deal of success is going to more than likely mean (at least initially) long hours for you as the owner. You will probably have to be at your bar or restaurant every day, and the hours will be long and likely run late into the night. These long hours and inconsistent (if any) days off can make even the most dedicated new owner burn out, meaning you will once again hate what you do for work.

How can you avoid having your dream turn into a nightmare? Be realistic and focus on your goals instead.

If you’ve never worked a single day in the industry you’re considering, then it’s probably a bad idea to buy into that industry. Business ownership has a sharp learning curve on it’s own, you don’t want to turn that learning curve into a cliff by trying an industry where you have no practical experience to fall back on.

You should choose a business based on the goals you have for owning a business. Do you need nights and weekends off because spending time with your kids is important? What would your ideal work schedule be? How much money will you need to make in order to sustain your lifestyle? What is a realistic amount of money you could invest in a business right now? Are you looking at owning a business for the long-haul or are you thinking more along the lines of serial entrepreneurship? These types of questions are going to very quickly narrow your focus to just those businesses that will fit with the life you’d like to have.

We aren’t saying no one should by a food service business. Perhaps the life you’d like to have totally matches with the life of a bar owner – what we are saying it’s incredibly important to figure that out long before you write a big check and someone hands you the keys.

Need help figuring out what businesses would fit with your entrepreneurial goals? Ask an experienced and qualified business broker. A discussion about what you’d like to get out of owning your own business is an all-important first step.

Have you always wanted to buy your own bar or restaurant, but now aren’t sure if that’s the right business for you? Would you like to know what types of businesses would fit your goals? Please ask us! Leave any questions or comments, we would be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

Why A “Used” Franchise Is Better Than Brand New

Published January 7, 2019

In our society, the word “used” typically carries with it a less than ideal connotation – it means that someone else got the best and the “used” buyer is left with what’s left.

In the business world, however, “used” gets a boost because a “used” business is an existing business. Existing businesses are good.

If you are thinking about getting into the franchise ownership game, you will have to initially decide if you want to start a new franchise location or try to find an existing franchise location to purchase.

If this is your first business or your first franchise – then buying existing is probably the best option.

Why?

An existing location is proven.

A franchise location that already exists and is currently running is far less of a gamble than putting a brand new franchise in an unproven location. An existing location also has an existing staff and it’s own established daily operations. There won’t be as much guess work for you as the franchise owner because there will be a seller there to train you as to what works and what doesn’t at that particular location and with that particular staff. An existing location is turn-key instead of starting from scratch.

An existing location has records.

Another major benefit only an existing location will have? Records. Deciding how much a business is worth to you as a buyer is far easier if there are records of the cash flow and finances of an already existing location. Buying new means a great deal of guesswork as to the future projections on your investment.

An existing location already has customers.

You might be considering a franchise because it comes with the added benefit of an already loyal customer base. The brand will definitely get people in the door, but and already established location will come ready-made with regular clientele.

An existing location offers flexibility during negotiations.

When you start a new franchise location, there are often strict rules and fee structures you must abide by – and very little (if any) room for negotiation. When you buy an existing franchise, there will likely be fees associated with an ownership transfer, but the price you pay and the terms of your deal will be largely in the hands of you and the seller. This may allow you some wiggle room in terms of price and contract terms, but this will depend on the franchise itself.

If a franchise is the business path for you, don’t get hung up on the “used” nature of an existing location – for most buyers it can be a far better bet. Ask your business broker about what franchises are currently available on the market and about the terms required to take over an existing franchise location.

Do you have more questions about how the process to buy a franchise differs from buying an independent small business? Do you want to know what the purchase of a franchise might cost? Please feel free to leave any questions or comments here and we would be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907