Buy a Business
We assist buyers step into the shoes of the seller and direct the seller's cash flow into the new buyer's family income. The time to buy a business and give yourself a 6–7 figure income might be right now.
Buying a business is a process that takes time. It can sometimes take years to find the right opportunity. When buying a business, you should expect to sign a Non-Disclosure Agreement, disclose financial information about your ability to purchase, and have a resume prepared. Key steps in the business search process:
- Ask the why question: Why do you want to buy a business? What work activities do you like? What lifestyle do you wish to pursue? Consider kids and family in your expectations.
- Create financial expectations: Determine what income you need to earn. Make sure your expectations are in line with the business financials and the cash flow return it can produce.
- Compile a Personal Financial Statement: Compile your assets and liabilities. Identify the capital you'll invest. Your Personal Financial Statement showcases your financial wherewithal to the seller's business broker.
- Define your acquisition criteria: Decide what industries, geographic area, and transaction size work best. Your motivation, lifestyle, expectations, financial statement, and résumé will help you develop your acquisition criteria.
Buy vs Start a Business
There are pros and cons to both. Seasoned entrepreneurs have discovered the risk/reward ratio favors buying an existing business.
Starting a business can pay great dividends, but a significant percentage of new businesses fail in the first years. Purchasing an existing business reduces risk and creates opportunities for tremendous profit:
- Bank Financing: Buying an established business is less risky; banks finance existing companies but rarely fund start-ups.
- Brand: You're buying a brand name. Marketing and networking were already done; this branding transfers to you.
- Relationships: You are buying an existing customer base and vendor base that took years to build. The seller often stays on to transition with the business for a short time.
- Focus: When you buy a business, you start working immediately and focus on improving and growing it; the seller already laid the foundation.
- People: In an acquisition, the most valuable assets are the people who show up and make the business work.
- Cash Flow: Existing business sales are structured so debt service is covered with a reasonable salary and profit for growth.
Creative Finance Options
The small business markets have several creative tools for today's business buyers:
- SBA Loans: Buyers speak with the broker to line up a Small Business Administration (SBA) lender for your industry. The SBA guarantees a portion of the loan.
- Seller Financing: Buyers and lenders often seek seller financing as part of their loan process. The seller holds a note at an agreed-upon interest rate. Lenders obtain comfort knowing the seller has a vested interest in the buyer's success.
- Earnouts: A certain dollar amount agreed on by the buyer and seller to be paid based on the performance of the company after the transaction is completed. Often used for companies in a turnaround situation.
In a typical transaction, the buyer may put down 20%, the seller may hold 10–20% in seller financing, and the lending institution would offer conventional or SBA financing to cover the difference.
Buy a Business
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