Here it comes
Sometimes it is better to look for a business that is not doing all that well.
Buying a business is a major decision, as it affects not only your career, but also your personal life.
With the decision comes doubts and here are presented some of the most common with their answer.
-How do I find a good business?
First you have to decide what you are looking for (revenue, net income, location, type of business, etc.) and determine how much you have / are willing to invest. This will help you to develop search criteria. A broker may and will help you find the best business for you.
-How can I finance the business acquisition?
Usually, businesses transactions are financed using cash from the buyer, some bank debt, and some form of vendor financing. The exact proportions and source of financing will vary a lot depending on a few things (like the size of the business, amount of physical assets included, how much the business has earned the past few years, etc.)
-Why should I consult with a business broker?
Not only can a professional business broker provide you with a selection of different and unique businesses, including many that you would not be able to find on your own but they are also an excellent source of information about the whole business acquisition process, as they have a lot of experience in the area, not to mention being familiarized with the market being able to understand trends.
Besides, most buyers end up with a business completely different from their first inquiries. Business brokers can offer you a wide variety of businesses to look at and consider.
Your business broker will handle all the details of the sale and will guide you in the right direction, and, if necessary, consult other professionals who may be able to further assist you.
-What should I look for?
It’s advisable to consider buying only a business that you can afford with what you have available. It’s useless to buy a business only to realize that you don’t have enough resources to maintain it, right? In addition the business must be able to offer you enough income to pay your bills. Lastly, when looking for a business to buy, always think about what you can do with it, about how to improve and make it grow, in other words, plan ahead.
-What does it take to be successful?
It’s important to have enough money to buy, maintain and improve the business. But probably the most important (and what most owners forget) is to be willing to work hard, at least in the start. The owner must be a little of everything (specially in small businesses case) and what a lot of buyers expect is to just sit down behind their desks and coordinate the company, not doing what it takes for the company to thrive and grow.
-Do I need a lawyer?
Business brokers are not qualified to give legal advice, but they do know when a lawyer can come in hand. You don’t NEED a lawyer, but they can help a lot. Consult with your broker to know when a lawyer should come into play to review the legal documents. It is important, however, that the lawyer you hire is familiar with the business buying process and has the time available to handle the paperwork on a timely basis. An experienced lawyer can be of real assistance in making sure that all of the details are handled properly.
Of course, these are only some of the most common, there are many more possible questions out there.
If there is any remaining doubt or any questions not mentioned here feel free to ask.
Business valuations are determined by two key factors: The cash flow and the multiple.
The cash flow is the “real” income, the one that the company is able to acquire. To get this value we subtract from the business income a few expenses that do not represent real connection to the company itself, due to high variability or are very specific to the way the company is being managed, like depreciation, owner’s compensation, etc.
The multiple is even more important. It’s similar to the idea of Price-Earnings Ratio or Earnings Multiple. This number represents how much each cent of the business is worth, as it basically shows the expecting growth for that company in the future. A high multiple means that this business will grow quite well, in comparison to one with a low multiple. Keep in mind that the range of these multiples will float depending on the type of business (a technology company will always have higher multipliers than a utilities one, for instance).
These are some of the main advantages of buying an existing business compared to starting a new business, or a new franchise. These are some of the reasons I have heard from some of my buyers, and in no way represent an exhaustive list:
1. Immediate cash flow
2. Trained employees
3. Established suppliers and credit
4. Established customers and referral business
5. Existing licenses and permits
6. Training by the seller
7. Availability of owner financing
8. Actual financial results rather than projections
Please, feel free to add on to these, or comment on any of the above!
Statistics show that more than 90% of people who want to buy a business never do. Buying a business is a long, frustrating process, and you really need to want to be your own boss to make it all the way through the process. We’re here to help you make it to your end goal. We recommend the following steps to ensure optimal results. These are a bit more elaborate than what discussed on www.BuyBusinessCanada.com and should assist you in really making sure you are not missing any important steps in the process.
1: Know yourself – what do you want to do? What are your strengths and weaknesses?
2: Determine the type of business you would like to buy & manage.
3: Do general business research on various types of businesses.
4: Determine your financial capabilities.
5: Contact Business Broker to help you research businesses available for sale in your local area.
6: Sign confidentiality agreement and get more information.
7: Have qualified professionals evaluate the information and help you narrow the business selection down.
8: Meet the business owner.
9: Make an offer based on an expert business valuation and subject to due diligence.
10: Final agreement on price & terms.
11: Due Diligence.
12: Closing the deal.
Information that everyone should consult prior to making their most important business decision to date – purchasing a business and living up the dream of an independent business owner!