The Advantage of Buying A Business
Are you considering buying a company? Acquiring businesses for sale can shortcut years of struggle. Consider all the entrepreneurs who have set up a new business in their garage, basement or spare room and all the hours and years they have poured into launching and building their business. You can skip past this entire business building phase and simply purchase a proven and successful established business from sellers who are wanting to sell their business. A seller will name their price, and it's up to the buyer to decide if the business is worth the price. What is the revenue and cash flow and sales revenue like? are their seasonal businesses? what is the sales data and sales trends? Has the company been featured in any prominent publications or news channels? Is it a small, medium or large enterprise? Is the asking price reasonable? Is the cash flow consistent? Which valuation method is the price based upon? Does the cash flow support the asking price? How long has the business been up for sale? What is the business location or locations? What are the contact details? At which location is the proprietor based? What's the financial health of the business like? What is your criteria for a business? What ROI could you expect?
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The Asking Price
You can deal with brokers or a company owner directly. It does not matter which industry or location you are in, there are always established businesses for sale in every sector and every location for a named price, from New Jersey to San Diego, North Carolina, New York, Canada, Florida or anywhere else. As a buyer you want to make sure you are getting the best business at the best price. There will always be sellers out there, so you should not have a scarcity mindset, and you should not rush into a deal.
Brokers may try to rush buyers but you should work with the best established business brokers who are reputable and in it for the long term. A buyer can be an experienced business owners, others are new to the business world completely. You need to understand and appreciate what is behind the business asking price, the cash flow and sale history. Businesses may have been trading for years and have lots of sale data to review and analyze. Businesses for sale may have summary sale data provided, so you would need to ensure you have access to the full historical sale data. This may be filed and publicly accessible. This can also include cash flow data. Small businesses being sold by a seller for a particular price may be overvalued so it's important to review and analyze the full sale and financial data.
The internet has also made it possible to sell online worldwide and broken down barriers for new buyers. If you want a local business, regional, national or online stores – every type of business and related biz opportunity is available. You simply have to find the best possible small business for sale from a seller in the right location or non-location specific depending on your preference which represents the value you are looking for. Choosing an established small business to buy is a personal choice, and working with a broker who understands your goals, criteria and price can make the process easier and faster. The key is the numbers and financial value of the business listed for sale. A business for sale broker can provide a professional service in this regard, either in a particular city or location or nationally or internationally. Brokers often know sellers and can find out about the best opportunities long before anyone else, and before a company is even advertised as being for sale with a price tag.
Business owners sell for many reasons, from retiring, to relocating, focusing on other areas, health reasons or a change of business or personal situation. You can buy a small firm from a broker or from a biz owner directly. The sellers will list their asking price and business particulars including cash flow information when listing their business for sale. Business assets and resources would also be provided in the business for sale listings description and overview which buyers can browse. You can browse business for sale listings and research potential businesses to buy. You should allow plenty of time for your search and due diligence, as you do not want to rush this process. It is better to have no business than to buy a bad business, or a business with poor revenue. You do not want to buy an unsuitable business and have a ton of inventory, or buy a business that is priced at more than its' real value. For this reason you should not rush your search. Sometimes a company owner will sell through business brokers, or a marketplace or they may sell direct either by advertising or word of mouth, or business for sale sign outside their business location. Selling can be a stressful process for owners so you should be aware and avoid giving false hope to sellers if a small business is not right for you, especially if the asking price is not suitable. For example if you are looking for a $50,000 business and the cost is $70,000. Some businesses like stores and restaurants will have high fixed costs such as rent and utility costs. It's important to consider the ideal type of business for you before contacting sellers or brokers. Are you more interested in a service business or product based business? Product based businesses will require inventory and fulfillment for stock and inventory. Stores will require staff and training etc. Services businesses can be more profitable and have lower associated costs. Local businesses may have smaller earning potential but would be more convenient for the proprietor. You need to think your preferences through before buying and taking on a firm. This will help you with your search.
Franchise Businesses For Sale
Franchising is also another option for aspiring business proprietors. A franchise opportunity allows you to be in business for yourself but not by yourself. A franchise would allow you to plug into an existing proven business model and brand which has value. Franchises are available in all categories you can imagine. From McDonald's, fast food outlets and restaurant outlets, weight loss, financial, shop or ecommerce, furniture, shopping, fitness, driving tuition, health, professional services and many more categories for products and services. Franchises can be local, regional, national, international, or online internet brands. You would be able to access and browse past performance data showing earnings potential and revenue which the market could generate. As the proprietor of a franchise or franchises you would be paying a fee to the franchisor (franchise seller) for the use of the brand, product, service, process or trademark in a specific area or territory. You would have support with your day to day business operations and typically professional services from the franchisor. They may provide a template site for franchisees to use so that you can focus on company growth and reduce the set up work required. Sometimes an owner will try to create a sense of urgency by creating the impression that another buyer interested. You need to understand the reasons why a business owner is selling the company in the first place. When you are planning to purchase business you want to be certain that you will be buying a safe and profitable asset, reducing risk as far as possible so that the business provides personal income, stability and security for you. The internet has made doing business in every industry easier, and also doing research easier for those planning on buying a business. There are many franchise listings, marketplace sites and portals, publications and events. There is generally an upfront franchise fee, followed by monthly or annual licensing payments. If the business model is based on stock, you would need to purchase inventory from the franchisor, for selling online or through franchisee stores. Depending on the franchise arrangement, they may provide customer service and related services to customers. This will allow you to focus on sales and building your business or stores. If you have a physical location, a branded sign would usually be provided. In a addition to a branded sign, you would also have access to related marketing and advertising material including business cards, posters and related items of interest to customers and potential customers. Business owners who buy often use this as a small business stepping stone and for valuable experience – often looking to launch their own profitable business in future. As this business model is based on an existing structure, the cash flow and revenue should be more predictable, compared to businesses for sale which are not part of a structure. The asking price will be set by the franchisor, and for them this model allows them to expand quickly into new location areas at low cost, while building their brand and market share. You should compare the asking price, revenue potential and specifics with other similar opportunities and locations and industry sectors for franchises.
The Due Diligence Process
The due diligence process is the process whereby a firm is reviewed and analyzed to ensure it is as described and meets the valuation. As this is a vital process, designed to reduce risk and ensure you are getting the right company at the right price, it should be carried out methodically and should not be rushed. If you are appointing an attorney, CPA or broker, they will have their own due diligence process. Remember there will always be businesses for sale – you want to ensure you get the best company at the best price. You do not want to end up with the wrong company which could be a costly mistake. Take time to search and research carefully and in detail. Part of your search should also include broader research and face to face or field research.
Assets are a key part of business. Which assets are included in the company valuation? You should also look for hidden assets. For example through technology it is possible to create new assets to multiply reach and revenue such as content publishing and leveraging a customer database or email marketing list. What new assets could be built based on the existing operation? or what existing assets could be leveraged in new ways? There may be existing assets which are not protected with a trade mark or other form of intellectual property. Which assets can you leverage, build or protect?
If you want your new company acquisition to become your main source of income, you will need to examine the numbers carefully to ensure that the business can provide the level of salary you seek. You need to consider the reasons for the sale of the business, and how solid the revenue and profits are. For example are there seasonal considerations which affect sales? You also want to measure how closely revenue and profitability is tied to the business owner. Are they the key contact, do clients or customers buy from the business because of the owner, their relationship or the reputation of the owner? How could things change if the business was under new ownership?
Product Based And Service Based Businesses
Product based businesses are generally higher cost since there is a physical product involved, and therefore inventory and fulfillment. You would also need to source or manufacture the products you are planning to sell. Service based businesses tend to be higher profit and lower cost since there is no physical product. Some sectors can also trade globally therefore increasing market potential.
Industry Sectors And Trends
It's vital to consider the landscape of the industry sector you are going into. What is the industry sector? how has it evolved over the years? how could it change in the future? What are the main trends or influences in the sector? How has the sector been affected during the pandemic? Can the enterprise pivot to new ways of trading to maintain viability?
You should review the business models carefully. Not only will this help you to select the best type of business for you, it will give you an overview of the different types of trading models and how to enhance and strengthen a business you choose to acquire.
Does the business have any licensing requirements? are all insurance policies in place? does the new business owner need to have any particular qualifications or certifications? Are there any state licensing requirements? Do any mergers and acquisitions regulations apply? You can assemble an expert team or panel for this purpose, possibly comprising a business broker, attorney and CPA. Fees spent on expert services can help to ensure a smoother process and higher chances of success by reducing risks and ensure you are working on the basis of a fair business valuation.
Putting Your Mark On The Business
It's always important to acknowledge and appreciate all the work the current business owner has accomplished. You can then take the business in the direction you seek, by adding your own strengths, skills, experience, ideas and strategies.
Make 2022 the year of business ownership. Do you want a local or national enterprise? there are always new opportunities, and new businesses for sale. You can also contact others in your network for advice about different industry sectors etc.
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