WHAT IS THE RIGHT BUSINESS FOR YOU TO BUY
Finding the right business for you to buy is not easy. Most of those who search for a business to buy spend a lot of time looking at businesses that do not fit their needs. Many buy businesses that they don’t even like.
First, you must ask yourself “Why am I buying a business?” Many individuals view the purchase of a business as an opportunity to fulfill entrepreneurial ambitions or to improve their lifestyles. Perhaps they’ve lost their job and it’s hard to find another one. Businesses may be buying for strategic reasons like long-term growth.
Not only is it important to buy the right business, it’s also important to buy it correctly.
Assess your interests, financial capabilities, and your abilities. A Mark W. Boslett, Inc. Chartered Mergers and Acquisitions Professional can help you do this. We can help you prepare and complete the education necessary to help you determine which is the best business for you and can help keep your focus on just those businesses that you are passionate about. This will save you much time and energy.
You are going to be working long hours at first and it is much easier to succeed in a business that you like and look forward to going to every day. Let us help you find it.
START-UP VERSUS BUYING AN EXISTING BUSINESS
Start- ups can be risky. After you pay the one-time start-up costs, the rate at which you “burn” through money for things like rent, utilities, payroll, and advertising can be quite high and it will continue until sales are sufficient enough to offset these costs and to start paying you a salary. You have to determine how long this will take and whether you can afford it.
Start-ups fail at a high rate. Many of these businesses go bankrupt because of internal failures rather than externally generated difficulties. As a result, getting bank financing is hard until you have two years of success. That means you have to rely on your own credit and oftentimes your credit cards.
Buying a business that is already established is a faster, cost effective, and least risky way to take charge of your financial future. You will have cash flow the day you begin to operate it. You will know its capacity and will have trained employees, customers, and established suppliers, credit, existing licenses, and referral business. You can have seller training and perhaps the availability of seller financing.
WHAT PRICE SHOULD I PAY?
There are several ways to arrive at the correct valuation of a business (see business valuation). Typically you want to pay for a business’s past performance, with an eye on how it will do in the future. If you expect the business to have future growth, than it will be quite a value for you.
HOW TO FINANCE THE BUSINESS PURCHASE
Buyers start with their own money or “buyers equity”. The buyer needs to know how much money they have to invest in the purchase of the business.
Typically the buyer will not have enough ready capital to complete the purchase for cash – additional cash flow will be needed. Bankers are usually the next place they turn.
Most small business purchasers require the seller to finance a portion of the sales. The loan terms given by the seller tend to be more flexible than those of the banks.
WHERE TO FIND A BUSINESS TO BUY
Most of the businesses that that are for sale don’t advertise. The owners are simply too busy to list their company for sale. Some owners are in denial of the inevitable exit from their company (see Exit Plan). Some owners don’t think about selling until they are presented with an offer or encounter a qualified buyer.