1. 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.
2. Be flexible. We advise clients to be open to all sorts of businesses. Do not lock yourself into a McDonald's or a Mailboxes, etc. Who knows, you may surprise yourself by taking a liking to 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, and coin-operated businesses. First, decide if there are any categories that you do not want to be in, then focus on the remaining categories.
3. Do not expect much financial info. 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.
4. Consider chemistry. This may seem like an unusual recommendation, but we tell 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.
5. 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 your success.
6. Do not pay cash. You may not want a loan over you 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.
7. 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.
8. Stay calm. Buying a business can be like dating. You've got so many emotions - 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, negotiate your offer with quiet 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.
9. 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 any area, change or terminate your offer. There should be stipulations in your offer that allow for this.
10 Close quickly. Once the deal is made, try to close as quickly as possible. You do not want the owner to have second thoughts or news to leak out to employees, supplier and/or clients.
Note: Remember ultimately the success or failure of the business is the owner's responsibility.
There is no 'RIGHT' business, so buyers must be flexible.
Follow this link to an entrepreneur guide for tips on the process to follow: ~~http://www.onlinemba.com/entrepreneurship-guide
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.
Business Brokers 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 the shots. A profitable track record is the key of a successful business. Let us assume you find a business that you like, 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.
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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. Visit commercial-loan.biz for more information.