Information For Buyers
"What
we can do for you..."
Security
A
big advantage in buying an ongoing business is that
you, as the new owner, have an immediate cash flow and
an established customer base.
You do not have to build a business; you simply
take over an existing, successful business with the
present owner’s assistance.
Financing
We assist you in obtaining financing.
Banks are reluctant to finance business
purchases for several reasons.
One, all small businesses attempt to minimize
profits shown on financial statements to reduce tax
liability. Also,
a bank cannot come in to manage a business if
foreclosure becomes necessary.
Therefore, over ninety percent of business
purchases are financed by the owner himself, which
demonstrates his confidence in the business.
Confidentiality
Unlike the sale of real estate or franchises, the sale
of an ongoing business is very confidential for both
the seller and the prospective buyer.
All inquiries are held in strict confidence.
Meetings are confidential, and we are available
after hours and on weekends.
Things a buyer should know
We
are advocates of finding a business that you like and
feel comfortable managing.
You, like every other prospective buyer, have a
vision of being your own boss and calling your own
shots. An
old saying in the real estate industry is … “The
three most important things a buyer should look for
are location, location & location.”
While location is important to a business
buyer, be aware that track record and management round
out the three components of a successful business.
Let us assume that you find a business that you
like and its location is fine, but
because of poor management, the business may not show
the greatest record of accomplishment.
Purchased for the right price and terms, this
business could become more successful with proper
management making it a good way to achieve your vision
of being in business for yourself.
Finally, be aware that many businesses sell for
much less than they are originally listed…
sometimes-even 50% less.
So, if it is a business that you like, do not
be afraid to make what you consider to be a low offer.
The
Process
The
process of buying a business is as follows:
-
Evaluate the basic information on alternative
businesses that sound interesting to you.
-
Visit the business (if possible) without
announcing yourself as a buyer (incognito) to get a
“feel” for the
business.
-
Meet with the Seller, asking from general to
probing questions on anything and everything, except actual price negotiations.
-
Do your preliminary evaluation, based on the
information provided by the seller to our office and
yourself.
-
Make an offer, assuming that all of the
information you have been provided is correct, but
include contingencies, which allow you to confirm such
information. We
will show you how to write an offer to protect
you as the buyer.
-
Once a sales price is agreed upon, make a
closer investigation of the business, confirming to
your satisfaction the validity of your offer.
-
Have documents prepared for the closing.
You may agree with the seller to share the cost
of a closing attorney.
This lawyer will not argue the position for
either party, but drafts all necessary legal documents
to comply with the agreement a buyer and seller have
reached.
-
Close the purchase, and begin your first day as
the owner of your own business.
The seller will assist in an orderly transition because most of
his money is coming from your success.
-
You are part of the American Dream – You and
your family own your own business!
Top
10 Tips for Buying the Right Business Right
- Buy
a business you like.
Although profitability is important, you
will risk making a terrible mistake if you do not
buy a business that you like.
Often, people who buy hastily without
considering personal satisfaction later sell their
businesses at a loss.
Will you be proud to own the business?
If you are not sure, do not buy that type
of business.
- Be
flexible. We
advise our clients to be open to all sorts of
businesses. Do
not lock your self into a McDonald’s or a
Mailboxes, etc.
Who knows, you may surprise yourself by
taking a liking t a Blimpie or Signs Now
franchise. If
you lock into only one type of business, it will
take you much longer to find a business to buy.
Examine the following categories: retail;
service; manufacturing; distribution; restaurant;
lounge; coin-operated business.
First, decide if there are any categories
that you do not want to be in, then focus on the
remaining categories.
- Do
not expect much financial information.
Do not expect “traditional” financial
information from the owner of a privately owned
business. The
only accounting required of a privately owned
business is filing tax returns, which are prepared
to report the lowest possible tax liability.
There are other ways to verify cash flow
later.
- Consider
chemistry. This
may seem like an unusual recommendation, but we
tell our clients to forget about
buying a business if they do not like the current
owner. The
buying process is a long and somewhat complicated
one -- it is imperative that the buyer and seller
work through it together.
- Go
with owner financing.
The owner of the business should finance
the purchase.
In most cases, this is the sole source of
financing available to buyers of an existing
business. With
owner financing, you can feel secure in believing
the owner’s representations as to income and
expenses, and you have a remedy if there are any
problems after closing.
It also gives you a “silent partner”
with a personal stake in you success.
- Do
not pay cash.
You may not want a loan over your head, but
do not pay all cash for a business – even if you
have it. You
should keep a stash on hand for emergencies and
business improvements.
If you insist on paying all cash, at least
place some of the purchase price in escrow for a
period of time to protect yourself from any
problems that may surface after the closing.
- Make
an offer before you have seen all of the financial
and other business records of the business.
It is simply not possible to know
everything about a business before you make the
initial offer.
The offer does not commit you to the
business, but it does let the seller know you are
serious.
- Stay
calm. Buying
a business can be like dating.
You’ve got so many emotions going –
do you like the business, does the owner like you,
is this feasible, what does my family think, etc.
– that you’re bound to get a little flustered.
Keep your wits about you; you will need
them. Remain
calm, and negotiate your offer with quite
reflection and reasoned discussions.
As you go through negotiations, always use
this simple formula: Cash Flow Available minus
Annual Payments to Owner = $$$ for you and your
family. If
at any time during the negotiations this formula
does not result in enough money for you and your
family, stop.
- Investigate
the business.
Once the owner has accepted your offer, the
real work begins.
Verify cash flow and identify any hidden
problems. If
you see red flags in either of these areas, change
or terminate your offer.
There should be stipulations in your offer
that allow for this.
- Close
quickly. Once
the deal is made, try to close as quickly as
possible. You
do not want owner to have second thoughts or news
of the sale to leak out to employees, suppliers
and clients.
THE
90% RULE: FACTS ABOUT BUYERS
- 90%
of all buyers are first-time buyers.
In other words, they have never been in
business before.
- 90%
of all buyers will finance the purchase of their
business.
- 90%
of all buyers do not know what kind of business
they want or best serves their needs.
- 90%
of all buyers are terrified and/or uneducated in
the business buying process.
- 90%
of all sales will be financed by the seller.
- 90%
(or more) will not buy the business that was
advertised or the one that they called in on.
Advantages of Buying an Existing Business
-
Actual
results rather than pro-forma.
-
Immediate
cash flow.
-
Trained
employees in place.
-
Established
suppliers and credit.
-
Established
customers and referral business.
-
Existing
licenses and permits.
-
Training
by the seller.
-
The
availability of owner financing.
Advantages
of Buying A Franchise
-
Known
name means instant recognition.
-
Proven
product or service.
-
Ongoing
support means you are in business for yourself but
not by yourself.
-
Better
than 90% of new franchises are successful.
-
Operating
system in place all the mistakes have been made!
-
Opportunity
to add additional units within the franchise
system.
-
Training
by the seller.
-
The
availability of owner financing.
Interested
in a business we have listed on our website? Click
here...
|
