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Buying an Existing Business – Part 5 – Transition

Transition Time

The transition to new ownership is a big change for employees of a small business. To ensure a smooth transition, start the process before the deal is done. Make sure the owner feels good about what is going to happen to the business after he or she leaves. Spend some time talking to key employees, customers and suppliers before you take over; tell them about your plans and ideas for the business’s future. Getting these key players involved and on your side makes running the business a lot easier.

Most sellers will help you in a transition period during which they train you in operating the business. This period can range from a few weeks to six months or longer. After the one-on-one training period, many sellers will agree to be available for phone consultation for another period of time. Make sure you and the seller agree on how this training will be handled, and write it into your contract.

If you buy the business lock, stock and barrel, simply putting your name on the door and running it as before, your transition is likely to be fairly smooth. On the other hand, if you buy only part of the business’s assets, such as its client list or employees, then make a lot of changes in how things are done, you’ll probably face a more difficult transition period.

Many new business owners have unrealistically high expectations that they can immediately make a business more profitable. Of course, you need a positive attitude to run a successful business, but if your attitude is “I’m better than you,” you’ll soon face resentment from the employees you’ve acquired.

Instead, look at the employees as valuable assets. Initially, they’ll know far more about the business than you will; use that knowledge to get yourself up to speed, and treat them with respect and appreciation. Employees inevitably will feel worried about job security when a new owner takes over. That uncertainty is multiplied if you don’t tell them what your plans are. Many new bosses are so eager to start running the show, they slash staff, change prices or make other radical changes without giving employees any warning.

So why has Business Transition Planning garnered so much attention of late?

Because, what lies ahead is what many experts are calling The Perfect Storm. Consider these facts about recent conditions: Studies show that for every 5 businesses listed for sale, only 1 actually sells 84% of business owners are depending on proceeds of selling their business for their next phase in life In a survey of 300 former business owners, 75% of the owners said they sold for much less than expected For family owned businesses only 30% of family-owned businesses survive to the 2nd generation, dropping to 17% for 3rd generation.

If that isn’t enough to create uncertainty for business owners let’s add a couple of trends that make the future transition environment even more sobering. Baby-boomers are heading to the exit in unprecedented numbers. Baby-boomer wealth is held in 12 million privately-owned businesses. Greater than70% of these businesses are expected to change hands in the next 10 to 15 years. The number of sellers will outnumber buyers.

Aside from sellers finding fewer buyers interested in their business, the glut will create a buyer’s market and downward pressure on selling prices and terms. As if that’s not enough, people are living longer requiring more money to sustain their standard of living, savings are at an all-time low, the global economy is changing at an ever increasing rate, and investment returns over the last decade have significantly eroded financial wealth leaving little time for those nearing their next phase in life to make up for the unplanned shortfall.

Less Than 10% Have a Transition Plan

What’s alarming, in light of the statistics and trends is less than 10% of business owners have a written transition plan. In fact, a lack of planning was identified as one of the largest contributors to the poor transition results noted above. Knowing business transition is such an important once-in-a-lifetime event, why are so many business owners unprepared? When asked, business owners’ top reasons for not addressing their transition were:  too early, too time consuming, and other.

The “other” category is the catch all for the emotional issues–issues related to fear and mortality. Owners fear letting go, loss of control, conflict (family transition), as well as losing their purpose and identity. These are big issues and all take time to address and resolve. It’s never too early to begin planning. Transition Plans begin with the vision or dream of what a business owner wants for his/her family, his/her business and themselves.

Each plan should be specific and tailored to the individual situation.

Done properly the planning process considers all factors, all interested parties, and the personal goals of the owners in a manner and time period that accommodates the business, its shareholders, and potential successors and/or buyers. The planning process will identify the amount of work, effort, and an estimate of the time required to achieve a chosen outcome. It’s not unusual for implementation of a plan to take five to ten years or more.

The earlier a business owner begins the planning process the greater their chances of surviving the perfect storm. Setting Priorities for the Business It’s not surprising business owners rank “too time consuming” high on the list of reasons for not planning. With the significance the business has in the life and livelihood of owners you would think they would make this a priority and find the time. The blame does not rest solely with owners.

The Exit Planning industry has not made it easy.

Historically, exit planners have been experts within a particular discipline (e.g. legal, accounting, or financial), good at what they do but not positioned to provide business owners with broader, objective planning and implementation help they need. The courageous owners willing to pursue a plan have had to be their own transition planning champion, not knowing much about what should be done, where to start, or which expert to listen to.

They are left struggling and frustrated trying to create and implement a plan. More recently, Transition Planning has improved with the emergence of independent objective experts who can take much of the planning and implementation burden off an owner. Further, they can be your champion ensuring that all the specialists on your team of advisors are working together and focused on your outcome.

Involve the staff in your planning, and keep communication open so they know what is happening at all times. Taking on an existing business isn’t always easy, but with a little patience, honesty and hard work, you’ll soon be running things like a pro.

Buying an Existing Business – Part 4 – Cash Alternatives

Alternatives to Cash

Short on money? Attempt these alternatives for financing your acquisition of an existing company:

Use the seller’s assets.

As quickly as you get the business, you’ll own the properties– so why not utilize them to obtain funding now? Make a listing of all the possessions you’re purchasing (in addition to any type of affixed liabilities), and also use it to come close to financial institutions, financing companies and also elements (firms that get receivables).

Buy co-op.

If you cannot afford business yourself, attempt going co-op– buying with someone else that is. To find a likely co-op buyer, ask the seller for a list of individuals which wanted the business however didn’t have adequate cash to acquire. (Be sure to have your legal representative write up a collaboration arrangement, consisting of a buyout condition, prior to entering into any partnership setup).

Use an Employee Stock Ownership Plan (ESOP).

ESOPs supply you a way to obtain resources right away by selling stock in business to workers. If you offer just non-voting shares of stock, you still keep command. By supplying to establish an ESOP strategy, you might have the ability to acquire a company for as low as 10 percent of the investment cost.

Lease with an option to buy. Some vendors will let you rent a business with a choice to purchase. You make a down payment, come to be a minority stockholder as well as operate the business is if it were your very own. Assume obligations or decline receivables. Minimize the list prices by either thinking the business’s responsibilities or having the vendor maintain the receivables.

Usual Mistakes to Avoid

Don’t be too anxious when you’re seeking to get a business. As we’ve mentioned already, if you’re as well anxious, this could have an effect on the deal.

Significant blunders are made by individuals who are troubled. Company experts employed by nervous customers can in some cases restore the circumstance, but oftentimes consultants are not called till an offer has been closed. As well as once your signature takes place that dotted line, you’re stuck to the investment. So remember that anxiousness or rashness isn’t really visiting help you acquire a business.

Take your time. Identify that there’s constantly time to review the business that’s for sale. No matter what a business broker, a company vendor, or other individual could inform you, there’s constantly time. Nine breaks of 10, the business that’s up for sale is going to be around for awhile. And also if it’s not, then it’s the vendor who is going to be the distressed one; as well as the vendor’s anxiety, naturally, is something that could be manipulated to your benefit as purchaser.

A few of the much more usual errors are:

Buying on rate. Purchasers don’t take into consideration ROI. If you’re going to spend $20,000 in a business that returns a five-percent web, you’re far better off placing your cash in stocks and assets, the local S&L, or municipal bonds. Any sort of type of abstract safety and security is visiting generate greater than 5 percent.

Cash lack. Some buyers use all their cash money for the deposit on business, though money management in the start-up stage of any business, new or existing, is essential to short-term success. They fall short to forecast future cash flow as well as possible contingencies that could need even more capital. Further, there has to be some earnings alloted for constructing the business via marketing and also Public Relations initiatives. So, if you have $20,000 to invest, ensure you do not spend the entire quantity. Maintain several of the resources. Though figures differ from sector to market, a typical backup is 10 percent. Furthermore, you might wish to reserve an amount that you considered your functioning funding, which in a number of companies suffices to cover regarding 3 months’ worth of costs.

Buying all the receivables. It generally makes good feeling to acquire the receivables, other than when they are 90 or 120 days old, or older. Frequently customers tackle all the receivables, also those beyond 90 days. This could be extremely high-risk since the older the account, the more difficult it’ll be to collect versus. You could secure yourself by having the seller require the receivables; just what’s not collectible can be charged back versus the investment deal of business. For receivables beyond 90 days, offer those to the owner, and view if they can gather.

Failure to validate all data. The majority of company customers accept all the info and data provided them by the seller at face value, without the verification of their very own accounting professional (ideally a CPA, that could investigate economic declarations). A lot of vendors would like to obtain their squander of business as soon as feasible, and purchasers often enable them to take all the quick possessions such as receivables, money, as well as equipment supplies, and occasionally generate devices. The seller speaks the customer into basically anything, recognizing that the customer really wants the business terribly.

Heavy repayment routines. Rookie company owner typically overestimate their income throughout the initial year as well as take on unduly large payments to fund the buyout. Normally, nonetheless, revenue rarely works out. Throughout the very first year of any operation, the owner experiences countless non-recurring costs such as devices failings, staff member turn over, etc. For this reason, it makes good sense to have a repayment routine that begins fairly light, then gets steadily heavier. This is something that could be negotiated with a vendor and also should not be difficult to arrange.

Treating the seller unfairly. Folks think that, considering that they are buying a business, the vendor goes to their grace. All frequently, the customer will be chilly, rigid and also hard-headed. Vendors with savvy will toss such folks out and also tell them not ahead back. Simply considering that you have some cash and might be interested in buying business, that doesn’t suggested that you aren’t going to need to offer a little in the process of agreement.

Buying an existing Business – Part 3 – Determining Fair Price

Determining a Fair Price

No choice is more mentally demanding than determining a fair price for an existing business. The owner has one idea of how much the business is worth, while the potential buyer will normally have an additional perspective. Each party is dealing from a various point of view and normally the one that is best prepared will certainly have the most leverage when the process gets in the negotiating phase.

Remember that a lot of business owners identify the price for their company arbitrarily or with a special formula that could put on that market only. In any case, there typically aren’t much solid truths upon which to base their choices.

Price is a hard element to pin down, consequently tough for the purchaser to analyze. There are a couple of elements that will certainly influence cost, such as economic problems. Usually, companies cost more when the economic climate is expanding and for a considerably lesser price during economic downturns. Inspiration also plays an essential factor. Exactly how terribly does the seller desire out? If the seller has lots of personal financial troubles, you may be able to buy business at a price cut rate by playing the waiting game. On the other hand, you should never ever let the seller recognize exactly how badly you would like to acquire business. This could affect the price you pay detrimentally.

Past these aspects, you can determine the worth of a company utilizing many different approaches listed below.

Multipliers
Basically, some owners determine the worth of their business by using a multiplier of either the regular monthly gross sales, regular monthly gross sales plus inventory, or after-tax revenues. While the multiplier formula may seem complex and very accurate to start with, if you delve a little deeper as well as consider the parts made use of to arrive at the explained value, there is in fact hardly any to verify the reached price.

The majority of the multipliers aren’t based on truth. For instance, individuals within a particular market could claim that specific businesses sell at three times their annual gross sales, or two times their annual gross sales plus inventory. Depending upon which formula the owner makes use of, the gross sales are multiplied by the appropriate number, as well as a cost is created.

Naturally, you can check the monthly sales number by looking at the income statement, yet is the multiplier a precise number? After all, it has been identified arbitrarily. There often hasn’t been an official survey carried out as well as validated by an outdoors source to reach these multipliers.

Furthermore, if the multiplier was precise, there is such a huge spread in between the reduced and also high ends of the range that it really simply acts as a ballpark figure. This is true whether a sales or earnings multiplier is utilized. When it come to an earnings multiplier, the figure generated comes to be even more skewed considering that companies seldom show a revenue because of tax reasons.

Consequently, the resulting worth of business is either really little or the owner has to make use of a different profit factor to come to a greater deal. Don’t place too much faith in multipliers. If you run across a seller using the multiplier method, utilize the deal only as a quote and absolutely nothing even more.

Book Values

This is a relatively precise method to identify the deal of a business, yet you need to exercise caution using this approach. To come to a deal based on the book value, all you have to do is find out what the distinction is between the possessions and liabilities of a firm to reach its net worth. This has normally been done currently on the annual report. The net worth is then multiplied by one or two to arrive at guide value.

This could seem easy enough. To examine the number, all you need to do is specify the company’s properties and obligations. Determine their value, get to the net worth, and afterwards multiply that by the proper number.

Possessions generally consist of any sort of unsold inventory, leasehold renovations, installations, devices, real estate, accounts receivable, and also products. Liabilities can be anything. They might also consist of business itself. Normally, however, you would like to note any kind of unpaid debts, outstanding taxes, liens, judgments, legal actions, bad assets– anything that will produce a money drain upon the business.

Now here is where it gets challenging. In the annual report, fixed possessions are usually listed by their diminished value, not their replacement value. Therefore, there really isn’t really a real price connected with the fixed assets. That could create extremely irregular values. If the possessions have been dropped throughout the years to a degree of absolutely no, there isn’t really anything on which to base a publication value.

Return on Investment

One of the most usual ways of evaluating any type of company is by its return on investment (ROI), or the quantity of cash the buyer will certainly understand from business in revenue after debt service and taxes. However, do not puzzle ROI with earnings. They are not the same point. ROI is the quantity of business. Earnings is a yardstick by which the efficiency of business is assessed.

Normally, a local business must return anywhere between 15 as well as 30 percent on assets. This is the average web in after-tax bucks. Depreciation, which is a gadget of tax obligation preparation and also capital, must not be counted in the web because it ought to be reserved to change devices. Numerous newbie business owners will consider a monetary statement and say, “There’s $5,000 we could take off for devaluation.” Well, there’s a factor for a devaluation routine. At some point tools does break and must be replaced, and also it often needs to be replaced rather compared to you anticipate. This is specifically real when considering a business with older devices.

The wisdom of purchasing a business hinges on its prospective to earn money on the cash you put into it. You figure out the worth of that business by examining just how much money you are going to gain on your investment. The business should have the capability to pay for itself. If it could do this and also provide you a return on your cash money investment of 15 percent or even more, then you have an excellent business. This is just what determines the deal. If the seller is financing the acquisition of business, your operating declaration ought to have a payment schedule that can be taken out of the revenue of the business to pay for it.

Does a 15-percent web for a business seem high? Everybody wishes to know if a company makes two, three, or 10 times revenue. They listen to price-earning ratios debated, and also neglect that such ratios typically describe firms detailed on the stock exchange. In small business, such proportions have actually limited worth. An industry can gain 10 percent on its financial investment as well as be extremely healthy and balanced. The big supermarkets internet 2 or three percent on their sales, but this tiny percent represents enormous quantity.

Small companies are various. The small company needs to normally earn a larger return considering that the danger of the enterprise is higher. The crucial point for you, as a buyer of a small business, is to recognize that no matter industry techniques for big business, it’s the ROI that you need to worry about many. Is it practical? If the cost is reasonable for the quantity of money you need to spend, then you could consider it a viable company.

Capitalization of Earnings

Valuing a business based on capitalized incomes resembles the return-on-investment method of analysis, other than typical incomes are made use of to approximate predicted profits, which are then separated by a common capitalization price. So what is a typical capitalization price?

The capitalization rate is established by learning just what the threat of financial investment in the business would be in comparison to various other investments such as federal government bonds or stock in various other business. For instance, if the rate of roi in government bonds is 18 percent, then the business should supply a return of 18 percent or better on the investment into it. To identify the worth of a business based on capitalized earnings, use the following formula: Projected Earnings x Capitalization Rate = Price.

So, after examining the marketplace, the competition, the demand for the item, as well as the company of the business, you determine that forecasted earning could boost to $25,000 per year for the following 3 years. If your capitalization price is 18 percent, then the value of business would be: $25,000/.18 = $138,888.

Typically, a great capitalization rate for acquistions will certainly range between 20 to 40 percent. If the vendor is asking a lot more compared to just what you’ve figured out the capitalized earnings to be, then you will certainly have to try and also bargain a lower deal.

Intangible Value

Some businessmen attempt to offer goodwill as an asset. Typically, in everyday accountancy treatments, most firms put down possibly one buck as the worth of goodwill. There is no doubt that goodwill has value, specifically if the business has actually developed a regular trade and also a sturdy base of accounts. But it is the economic value of the accounts, not their psychological value, that should be placed on any economic declarations.

Goodwill as such is not an asset. You as a customer would certainly analyze business based upon the roi. Specific guidelines of the game might alter when you go into the industries of acquisition as well as merging. Suppose you buy out your competitors, combine all your facilities, and increase your quantity. Now the labor as well as overhanging aspects are a lot lesser. Thus, even if the vendor was shedding possibly 5 percent a year, if you bring them into your firm, which is making 15 percent a year, it could enable you to increase sales and also end up making 20 percent.

The Art of the Deal

Selecting a price, however, is simply the primary step in working out the sale. More vital is exactly how the bargain is structured. David H. Troob, chairman of Geneva Companies, a national mergers as well as acquisitions customer services company, recommends that you should be ready to pay 30 to 50 percent of the rate in cash, and also fund the remaining quantity.

You could fund with a standard lending institution, or sellers might consent to “hold a not,” which means they approve repayments over a time frame, just as a lending institution would. Many sellers such as this approach because it ensures them of future income. Other sellers may accept different terms– as an example, approving advantages such as a business automobile for a time period after the deal is completed. These methods can lower the quantity of in advance money you require; Troob advises, nevertheless, that you ought to constantly have a lawyer testimonial any sort of plans for validity as well as responsibility concerns.

A specific purchasing a company has two alternatives for structuring the offer (thinking the deal is not a merging). The first is property acquisition, in which you purchase simply those assets you desire. On the plus side, possession purchase shields you from unwanted legal responsibilities considering that instead of buying the corporation (as well as all its lawful risks), you are acquiring only its properties.

On the downside, a property acquisition can be extremely expensive. The asset-by-asset buying process is complicated as well as opens the probability that the vendor could raise the price of preferable assets to off-set losses from undesirable ones.

The other alternative is stock purchase, in which you acquire stock. Among other things, this suggests you must be willing to acquire all the business possessions– as well as assume all its obligations.

The final acquisition agreement must be structured with the assistance of your acquisition group to show quite specifically your understanding and also intentions relating to the buy from a monetary, tax obligation and also legal point ofview. The agreement should be all-inclusive and also must allow you to rescind the offer if you locate at any moment that the owner intentionally misstated the business or failed to state essential details. It’s additionally a good idea to include a no contend clause in the agreement to make certain the vendor does not open a competing operation down the road.

Buying an Existing Business – Part 2 – Evaluation Checklist

Evaluation Checklist Before You Decide to Buy

Following is a list of things you need to review to confirm the value of a company just before making a decision to get:

1. Supply. Describes all devices and also materials inventoried for resale or use in servicing a customer. Vital note: You or a qualified representative must exist during any kind of examination of stock. You must know the status of supply, what’s on hand at present, as well as just what was on hand at the end of the last financial year and the one coming before that. You ought to also have the inventory appraised. After all, this is a tough possession and you should know what dollar value to delegate it. Also, inspect the stock for marketability. How old is it? Exactly what is its high quality? What condition is it in? Remember that you don’t need to approve the worth of this supply: it is subject to negotiation. If you feel it is not in line with exactly what you wish to offer, or if it is not suitable with your target market, after that of course bring those points up in agreements.

2. Furniture, fixtures, equipment as well as building. This consists of all items, workplace devices as well as possessions of business. Acquire a list from the seller that consists of the people and version variety of each tool. Then determine its existing problem, market price when purchased versus present market price, and whether the equipment was acquired or leased. Discover just how much the vendor has actually invested in leasehold enhancements and also maintenance in order to keep the center in good condition. Establish just what alterations you’ll need to make to the structure or layout in order for it to fit your requirements.

3. Duplicates of all agreements as well as lawful documents. Agreements would certainly include all lease and investment arrangements, circulation agreements, subcontractor agreements, sales agreements, union contracts, employment contract as well as other instruments made use of to legitimately expected business. Additionally, examine all other legal papers such as make believe company name statements, posts of fusion, registered trademarks, copyrights, patents, and so on. If you’re thinking about a business with important intellectual property, have a lawyer examine it. When it come to a real-estate lease, you should learn if it is negotiable, how long it runs, its terms, and if the property owner needs to offer his or her approval for project of the lease.

4. Incorporation. If the company is a corporation, check to see what state it’s registered in as well as whether it’s running as an international corporation within its own state.

5. Tax returns for the past 5 years. Numerous local business owners take advantage of the business for personal requirements. They may acquire devices they personally use and charge them to the business or take vacations utilizing firm funds, go to exhibition with their spouses, and so on. You need to utilize your logical abilities and those of your financial advisor, to establish what the real financial net worth of the firm is.

6. Financial statements for the past five years. Examine these declarations, consisting of all publications as well as financial documents, as well as contrast them to their tax returns. This is especially essential for identifying the gaining power of the business. The sales and running ratios must be analyzed with the assistance of an accountant acquainted with the sort of company you are taking into consideration. The operating proportions must also be compared versus sector proportions which could be discovered in yearly records created by Robert Morris & Associates in addition to Dun & Bradstreet.

7. Sales records. Although sales will be logged in the monetary declarations, you need to likewise evaluate the month-to-month sales records for the past 36 months or more. Break sales down by devices groups if numerous devices are included, in addition to by money and credit rating sales. This is an useful indication of current company task as well as offers some understanding of cycles that the business could look at. Contrast the market norms of seasonal patterns with just what you view in the business. Likewise, acquire the sales numbers of the 10 largest make up the previous 12 months. If the vendor does not wish to release his or her biggest accounts by people, it’s great to delegate them a code. You’re just interested in the sales pattern.

8. Full listing of responsibilities. Consult an independent attorney and financial advisor to check out the listing of obligations to determine prospective expenses as well as legal complexities. Discover if the owner has used properties such as capital devices or accounts receivable as security to protect short-term fundings, if there are liens by creditors against assets, suits, or various other claims. Your accountant should also check for unrecorded liabilities such as employee benefit claims, out-of-court settlements being repaid, and so on

9. All accounts receivable. Crack them down by 30 days, 60 days, 90 days as well as past. Checking receivables is very important because the longer the period they are outstanding, the reduced the worth of the account. You must also make a listing of the leading 10 accounts and also inspect their credit reliability. If the clients is creditworthy and also most the accounts are superior past 60 days, a stricter credit collections policy might accelerate the collection of receivables.

10. All accounts payable. Like receivables, accounts payable ought to be broken down by 30 days, 60 days, as well as 90 days. This is important in establishing just how well cash flows with the firm. On payables more than 90 days aged, you should examine to see if any type of financial institutions have positioned a lien on the company’s assets.

11. Debt disclosure. This consists of all outstanding notes, lendings and also any other debt to which business has actually concurred. View, as well, if there are any business financial investments on the books that may have happened beyond the regular location. Take a look at the level of fundings to consumers also.

12. Product returns. Does the business have a high rate of returns? Has it grown in the previous year? If so, can you separate the reasons for returns as well as correct the problem(s)?

13. Customer patterns. If this is the kind of company that can track customers, you will want to know particular qualities concerning existing customers, such as: How many are new customers? The amount of consumers were shed over the past year? When are the peak acquiring periods for current clients? What sort of product is one of the most preferred?

14. Marketing techniques. How does the owner acquire customers? Does she or he supply discounts, promote boldy, or carry out public-relations projects? You need to obtain copies of all sales literature to see the sort of photo that is being projected by the business. When you look at the literature, make believe that you are a client being gotten by the firm. How does it make you feel? This could give you some concept of just how the business is perceived by its market.

15. Advertising and marketing prices. Assess advertising expenses. It is usually much better for a business to hold off earnings at year-end up until the following year by spending a lot of cash on advertising throughout the last month of the financial year.

16. Price checks. Examine present catalog and savings timetables for all devices, the day of the last cost boost, and the portion of boost. You might even go back and also take a look at the previous price rise to see just what portion it was and determine when you are most likely to be able to elevate costs. Here once more, contrast just what you see in the business you are looking at, with criteria in the market.

17. Sector and also market record. You must examine the industry and also the certain market sectors of the business targets. You need to figure out if sales in the market, as well as in the market section, have actually been growing, decreasing, or have continued to be inactive. This is essential to figure out future earnings capacity.

18. Area and market location. Examine the place of business as well as the market area bordering it. This is particularly important to retailers, who draw most of their business from the key trading location. You ought to conduct a comprehensive analysis of business’s place and also the trading locations surrounding the location including financial outlook, demographics and also competition. For solution businesses, obtain a map of the area covered by the business. Learn, based upon the areas of numerous accounts, if there are any special requirements for providing the item, or any transportation troubles experienced by the company in obtaining the product to market.

19. Credibility of business. The photo of business in the eyes of consumers and also suppliers is exceptionally vital. As we discussed, the picture of the business could be a property, or an obligation. Meeting consumers, providers and also the financial institution, along with the proprietors of various other businesses in the location, to determine the reputation of the business.

20. Seller-customer associations. You need to discover if any customers are related or have any kind of special connections to today proprietor of business. How long has any type of such account been with the business? What percentage of the company’s business is represented by this particular client or set of customers? Will this customer continuously buy from the company if the ownership adjustments?

21. Inflated incomes. Some incomes may be blown up or maybe the current proprietor may have a family member on the pay-roll who isn’t working for the company. Each one of these probabilities ought to be assessed.

22. Listing of current staff members and organizational graph. Current staff members could be an important asset, particularly key employees. Review the organizational chart to comprehend that is accountable to which. You need to additionally consider the management practices of the company as well as master the salaries of all workers and also their length of employment. Analyze any kind of management-employee contracts that exist aside from a union agreement, as well as information of worker advantage strategies; profit-sharing; health, life and crash insurance coverage; holiday policies; as well as any type of employee-related legal actions versus the company.

23. OSHA needs. Figure out if the facility fulfills all work security and health needs as well as whether it has actually been examined. If you feel that the vendor is “hedging” on this and also you see some belongings you feel could not be safe on the premises, you can ask the Occupational Safety as well as Health Administration (OSHA) that can help you with an assessment. As a possible customer of a business that could come under OSHA examination, you have to be particular that you are not buying a risky business. Some sellers may view your asking for OSHA’s aid as a dirty trick. Yet you should realize that as a potential, significant purchaser, you need to shield your position.

24. Insurance. Establish exactly what type of insurance coverage is held for the procedure of business and all of its residential properties along with that the underwriter as well as local firm rep is, and also how much the premiums are. Some businesses are underinsured and running under possibly dreadful circumstances in situation of fire or a major disaster. If you enter an underinsured procedure, you could possibly be erased if a significant loss takes place.

25. Item liability. Devices obligation insurance coverage is of specific interest if you’re acquiring a manufacturing company. Insurance insurance coverage can alter substantially from year to year, and this could markedly affect the cash flow of a firm.

Buying an Existing Business, Part 1

When the majority of people think of beginning a business, they think about starting from scratch– developing your own concepts and also building the firm from scratch. But going back to square one offers some unique downsides, including the problem of constructing a consumer base, marketing the brand-new business, employing employees as well as setting up capital … all without a performance history or credibility to take place.

Acquiring an Existing Business

In most cases, buying an already existing business is less high-risk compared to going back to square one. When you get a company, you take control of a procedure that’s already producing cash flow as well as earnings. You have a well established consumer base, credibility and also employees which recognize with all aspects of business. And also you do not have to change the wheel– establishing new procedures, systems and also plans– because a successful formula for running business has currently been established.

On the disadvantage, getting a business is frequently a lot more pricey than going back to square one. Nonetheless, it’s much easier to get funding to get an already existing service than to start a new one. Lenders as well as investors normally feel much more comfortable managing a service that already has a tested track record. In addition, purchasing a business could provide you important lawful rights, such as patents or copyrights, which can prove quite lucrative. Certainly, there’s no such belongings as a safe bet– as well as acquiring an already existing company is no exemption. If you’re not careful, you might acquire stuck to obsolete supply, uncooperative workers or obsolete distribution approaches. To make certain you obtain the most effective offer when acquiring an existing business, be sure to adhere to these steps.

The Best Choice

Buying the excellent service starts with selecting the best sort of business for you. The best location to begin is by taking a look at a sector with which you’re both acquainted as well as which you understand. Think long and also hard about the types of businesses you’re interested in as well as which ideal match your skills as well as encounter. Also take into consideration the size of company you are looking for, in terms of workers, number of places as well as sales. Next, identify the topographical location where you wish to own a company. Analyze labor pool and also costs of doing company in that location, including earnings and also taxes, to make sure they’re appropriate to you.

As soon as you’ve decided on an area as well as an industry to focus on, look into every business in the location that meets your needs. Beginning by looking in the local paper’s classified area under “Business Opportunities” or “Businesses available for sale”. You could additionally run your own “Want to Buy” advertisement explaining exactly what you are trying to find. Remember, merely since a service isn’t detailed doesn’t mean it isn’t really for sale. Talk with company owner in the market; several of them could not have their companies for sale however would take into consideration marketing if you made them a deal. Put your networking capabilities and also company calls to utilize, as well as you’re likely to hear of other companies that may be excellent customers.

Getting in touch with a business broker is an additional means to find companies available for sale. The majority of brokers are hired by sellers to find customers and assist bargain bargains. If you hire a broker, he or she will demand you a compensation– generally 5 to 10 percent of the acquisition cost. The aid brokers could supply, especially for novice customers, is usually worth the expense. Nonetheless, if you are truly trying to save money, take into consideration working with a broker only when you are near the final negotiating phase. Brokers can provide help in many methods.

Prescreening services for you. Good brokers refuse several of business they are asked to sell, whether since the seller won’t provide full financial disclosures or since business is overpriced. Going through a broker aids you prevent these bad dangers.

Helping you identify your passion. A good broker begins by learning about your abilities as well as interests, then assists you pick the ideal company for you. With the help of a broker, you might discover that a sector you had actually never ever considered is the suitable one for you.

Bargaining. The negotiating process is really when brokers gain their keep. They help both parties stay concentrated on the supreme target and smooth over any kind of issues that may arise.
Assisting with paperwork. Brokers know the current laws as well as regulations affecting everything from licenses and allows to financing and escrow. They additionally recognize one of the most efficient means to cut through bureaucracy, which could slash months off the purchase procedure. Dealing with a broker lessens the threat that you’ll neglect some important form, charge or action in the process.

Preliminary Analysis

Whether you make use of a broker or go it alone, you will certainly want to assemble an “acquisition group”– your lender, financial advisor and lawyer– that can help you. These advisors are vital to exactly what is called “due diligence”, meanings that examining and confirming all the pertinent information about the business you are considering. When due persistance is done, you will understand merely exactly what you are buying and from which. The initial analysis starts with some basic inquiries.

Why is this business available? Just what is the general understanding of the industry as well as the particular company, and also exactly what is the overview for the future? Does– or can– the business control sufficient market share to stay rewarding? Are basic materials needed in abundant supply? How have the company’s product and services lines changed over time?

You likewise should examine the firm’s track record and the strength of its company relationships. Speak with existing clients, suppliers and merchants concerning their connections with the business. Call the Better Business Bureau, industry organizations as well as licensing as well as credit-reporting agencies to make sure there are no issues against the business.

If business still looks appealing after your preliminary analysis, your acquisition baseball team ought to start examining the business’s potential returns and its asking cost. Whatever method you utilize to establish the fair market price of business, your assessment of business’s worth ought to consider such problems as the business’s economic wellness, its earnings history as well as its development possibility, as well as its intangible assets (as an example, brand and also market placement).

To obtain a concept of the company’s expected returns as well as future economic needs, ask the business owner and/or financial advisors to reveal you predicted monetary statements. Balance sheets, revenue statements, cash flow declarations, footnotes and tax returns for the past three years are all vital signs of a business’s health. These files will certainly aid you conduct a monetary analysis that will highlight any underlying problems and also supply a closer look at a vast array of less concrete details.

Next: Part 2 Evaluation Checklist Before You Decide to Buy

3 Big Mistakes First Time Business Owners Make

First Time Business Owners are Prone to These Rooky Mistakes

Clark is a successful 3 time business owner as well as he is just 25 years of ages. From his somewhat unique viewpoint I asked Clark to share the Beginning Business Errors he views most. Here’s just what he said:

1) Don’t anticipate to be excellent. The errors people make when Building New Businesses resemble what somebody experiences trying to run a marathon for the initial time. Your First Business is not likely the one that makes you wealthy, Clark claimed. If you observe any sort of uber-successful Entrepreneur you’ll likely view many prior endeavors that supplied necessary understanding encounter. Like a First-Time marathon jogger, the time you invest in finding the excellent running footwears, running style, foot strike as well as training strategy will certainly make little difference when you’re puffing one hr in to exactly what’s most likely to be a four-to-five hr fight of willpower.

2. Do not obtain immobilized by your Fears. “We view new individuals acquire paralyzed by their bother with what’s coming,” Clark claims. “What takes place if a distributor does not send my item? Suppose someone sues me? Just what takes place if I increase also huge and need to change firm framework?” These and a thousand various other concerns won’t matter if you never ever acquire a Business Off the Ground, Clark states, however worries often stop Prospective Entrepreneurs from building any sort of Business whatsoever. If you’re just getting out of the starting entrance, do not squander your psychological power computing the number of countless actions you’ll absorb the 24th and also 25th miles of the race. Stressing too soon will sap the important motivation you’ll have to draw you with the long roadway to Success, Clark recommends.

3. Do not acquire Derailed by your First Setback. “We view far too many New Business Owners ignited with aspiration that fades away with the initial unpreventable hurdle,” Clark states. When building a New Business, comprehend that you will certainly experience issues on a day-to-day basis. There will be customer support concerns, item as well as stock problems, staff member concerns. At one time or another, every location of business will seem like it’s crumbling.

This is the strain that originates from developing something that’s never existed just before by an individual who’s never ever done it before (that’s you). “Like a marathon runner, expect to really feel pain along the way,” Clark says. “But also recognize that after you work through the discomfort and the bumps in the road, the flexibility you gain from understanding you will certainly never ever have to depend on another person for your Financial Freedom is well worth it,” he claims.

With that said, below are 10 items of advice that I wish someone had provided me prior to I launched my initial venture.

Concentration. Concentration. Concentration.
Numerous first-time entrepreneurs feel the have to hop at every “chance” they stumble upon. Opportunities are often wolves in lamb’s garments. Stay clear of getting side-tracked. Juggling several endeavors will certainly spread you thin and limit both your efficiency as well as efficiency. Do one point completely, not 10 points improperly. If you feel the have to jump onto an additional job, that might indicate something concerning your initial principle.

Know exactly what you do. Do exactly what you understand.
Don’t begin a company merely due to the fact that it appears gorgeous or flaunts huge theoretical profit margins and also returns. Do exactly what you enjoy. Businesses built around your staminas and also abilities will certainly have a better possibility of success. It’s not only vital to create a successful company, it’s also essential that you’re happy handling as well as increasing it day in and day out. If your heart isn’t really in it, you will not achieve success.

State it in 30 seconds or do not state it at all.
From a chance experience with an investor to a curious customer, consistently prepare to pitch your company. State your objective, solution and also objectives in a clear and also succinct manner. Fit the pitch to the individual. Much less is constantly much more.

Know what you know, just what you have no idea and also that knows exactly what you don’t.
Nobody recognizes every little thing, so don’t come off as a know-it-all. Surround on your own with consultants as well as coaches that will nurture you to come to be a much better leader as well as business person. Locate successful, educated individuals with whom you share common passions and also common business goals that see worth in collaborating with you for the lasting.

Act like a start-up.
Ignore expensive workplaces, fast cars and also fatty tissue travel and entertainment account. Your budget is your company’s life-blood. Method and excellent the art of scrimping. Watch every buck and triple-check every cost. Maintain a reduced expenses as well as manage your cash flow effectively.

Learn Under Pressure
No company book or business plan could predict the future or completely prepare you to end up being a successful business owner. There is no such thing as the best plan. There is no perfect roadway or one much less traveled. Never ever leap right into a new company with no thought or preparing, however don’t spend months or years waiting to carry out. You will come to be an all-around entrepreneur when tested under attack. The most essential thing you could do is gain from your errors– and never ever make the very same error twice.

Nobody will give you cash.
There, I claimed it. No one will certainly purchase you. If you need large amounts of resources to release your venture, go back to the attracting board. Locate a beginning point instead of an end point. Reduce costly plans and also grand costs. Streamline the concept till it’s manageable as an early stage venture. Discover methods to show your business version on a shoestring spending plan. Demonstrate your worth just before aiming for investment. If your concept achieves success, your possibilities of elevating capital from financiers will significantly boost.

Be healthy.
No, I’m not your mommy. However, I vow that you will certainly be far more productive when you take much better care of on your own. Entrepreneurship is a way of living, not a 9-to-5 career. Working to the point of exhaustion will certainly burn you out and make you much less effective. Do not make justifications. Consume right, workout as well as discover time for yourself.

Do not succumb your own B.S.
Don’t talk the talk unless you could walk the stroll. Excite with action not discussion. Recommend your business enthusiastically, yet tastefully. Stay clear of exaggerating facts and also boasting much getting to goals as sureties. Basically, put up or stopped talking.

Know when to call it quits.
In contrast to public opinion, a wise captain does not go down with the ship. Do not go on a fool’s task for the sake of ego. Know when it’s time to walk away. If your suggestion doesn’t work out, review what failed and the errors that were made. Examine what you would have done in different ways. Determine how you will certainly utilize these hard-learned sessions to far better yourself as well as your future business undertakings. Failure is unavoidable, however a real entrepreneur will certainly prevail over misfortune.

Buying a Business from a Friend

Tips for Buying a Business from a Friend

We get questions from time to time from individuals who are interested in buying a business from a friend but aren’t sure if they should.  If this sounds like you, then here are some tips on what you need to know and what questions to ask your friend, the existing owner, if you plan on buying an existing business from your friend. Buying a business from a friend isn’t any different than buying a business from a stranger.

1. Understand the company’s business model.  How has the company been selling their products to date?  How have those different sales methods worked for them?  Are there areas you can see where you can grow the business further if that’s your ultimate goal?

2. Understand the company’s profit and loss. Make sure you look at the Profit and Loss statement not just from this year but from the previous few years.  This will provide you with insight into the financials – which are the backbone – of the company including if what the current owner is saying is proving out to be true in the numbers.  If you’re not comfortable reading a P&L you should ask someone else to help you.

3. What equipment and/or inventory is transferable with the sale?

4. How much training is going to be included with the sale?  This is especially important for involved owners where you as the owner might be responsible for some of the production.  Even if the company has a staff, you need to make sure you understand all of the parts of this business if you want to be successful.

5. Are there any debts or liabilities that are being transferred with the sale?  This can happen in certain business transactions but you should make sure you understand what you’re getting into and make sure the purchase price reflects those risks you’re assuming.

6. Are the margins realistic and are the prices appropriate for the marketplace.  Someone may have a great concept but if they haven’t been able to make it pencil out numbers-wise then you need to ask yourself why and determine if there’s something you can do to change that.

7. Does this business and business model fit with your lifestyle?  Small business is notorious for its odd hours and hard work.  Even if you’re ready to undertake the work, make sure you understand how this business will fit into the rest of your lifestyle so that if you move forward it’s something that you love building for years to come.

This is, of course, not meant to be a complete list and you should certainly enlist the help of an expert at Florida Business Brokers, LLC throughout this process to make sure that you are financially and legally protected throughout the process.

Draw the Line

If you are buying a business from a friend, you must still take the steps necessary to ensure the deal is worthwhile and legal. You should draw a line between your personal interaction with your friend and the transaction of buying his business. Since a business is an investment, make sure you are investing money in an operation that is lucrative, or has the potential to provide you with a return on your investment.

Research the Business’s History and Finances

Before you seriously consider buying a business from a friend, find out as much as you can about it. Thoroughly review copies of the business’s certified financial records, including cash flow statements, balance sheets, accounts payable and receivable, employee files including benefits and any employee contracts, and major contracts and leases, as well as any past lawsuits and other relevant information.

This review (lawyers call it “due diligence”) will not only help you understand how the company ticks, but will alert you to potential problems. For instance, if a major contract like a lease prohibits you from taking it over without the landlord or other party’s permission, you won’t want to finalize the deal without getting that permission.

Don’t be shy about asking your friend for information about the business, and if they refuse to supply it, or if you find any misinformation, this may be a sign that you should look elsewhere.

Vending Machine Businesses

How to Start a Vending Machine Business or Route

Owning and Operating a Vending Machine Business – The Basics
Welcome! Interested in starting a vending machine business? Great decision! According to Forbes Magazine, operating a vending route is one of the easiest businesses to start. And, the best part, this virtually recession-proof business has the potential to earn a return on investment the instant you set up your first vending machine.

Before diving in, thinking through a few basics will help you build a strong foundation for vending business success. Read on for some more tips on what works to get your vending business up and running!

Customers frequently ask us, “What do I need to do to start my own vending business?” If you are just starting out, we hope this resource can answer most of your questions, while providing you with some helpful tips and tricks from industry veterans. We will be adding content on a regular basis, so check back often. We want to hear from you! If there is a topic you would like to see covered, please let us know!

Question to Ask Before Starting a Vending Business

  • What machine should I choose?
  • How do I find a location?
  • What products should I vend?

Below you will find information that will help you as you build your vending route and establish your vending machine business.

Vending Machine Maintenance

Your vending route is only as strong as your machines, so servicing and maintaining the vending machines in your route is essential. There are many different types of vending machines on the market, but the topics covered below should apply to most vending machines.

  • Adjusting or changing your Dispensing Wheel
  • Attaching your Machine to a Stand
  • Replacing a vending machine lock instructions
  • Servicing your Machine
  • Changing a Coin Mechanism
  • Taking your vending Machine Apart (and putting it back together)

Tricks of the Trade Topics

  • Candy Wheel Settings
  • Keeping Mike & Ike’s from Sticking to Each Other
  • One Minute Vending Machine Pitstop
  • Spin Coin Mechanisms

General Guidelines to Starting your Vending Business

Due Diligence

Before setting up your vending machines, determine the cost of business and analyze the location. Some things to consider:

  • Find a reputable supplier of commercial quality vending machines (like Gumballs.com!).
  • How many potential customers might purchase an item from the vending machine? If your vending machine is in a public location, observe the foot traffic. If your vending machine is placed in break room, know the number of employees that will have access to the machine.
  • Determine your cost of business by adding together all the overhead costs, including the cost of the vending equipment, vending supplies, transportation (vehicle and fuel), etc. How much will you need to price your vending items to turn a profit? Remember that vending machines are a one-time cost and that the vending machines will need to be up and running for some time before recognizing a profit.
  • Numbers will fluctuate depending on if you purchase cases of gumballs, bulk candy or toy capsules, etc., in bulk where you might get a discounted rate OR if you decide to sell a product that costs more. The beauty of a vending business is that it can be tweaked along the way to see what works and what doesn’t, while maximizing your profits.

Target Your Customers

Once your locations are secured, place machines and vending products that appeal to the customer.

  • Vending machines that dispense temporary tattoos, stickers or toy capsules filled with items that are currently “hot” with kids and teens are great in areas that attract a young crowd. Gumballs.com offers the latest vending supplies targeted toward the younger population including bouncy balls, toy capsules, tattoos, stickers, gumballs, bulk candy and more.
  • If the location attracts older individuals, a soda and snack machine (just be sure you have access to an electrical outlet) is a great choice, or stock your vending machines with chiclet gum, mints, nuts or energy drinks.
  • If placing your vending machine in a break room, ask your business contact what type of snacks and soft drinks the employees would like.
  • Before setting up any vending machines, be sure that you have adequate space for your machine as well access to an electrical outlet (if needed).
  • Remember that as the owner of your vending machines, you are responsible for keeping them filled and working properly.

Start Small

Once you’ve secured some locations, it’s time to purchase the machines and get them up and running! New to the vending business? Try starting with smaller machines that require a minimal upfront investment, such as gumball machines or triple-head candy machines. Maintenance on these machines is minimal when checked on a regular basis. Plus, no electrical hook-up is required.

Vending Machines are a great business in that you can start with one machine and use the profits to roll back into the business and it will pay for itself as you grow the number of vending locations that you offer.

Frequently asked questions regarding vending machine businesses:

How much will my vending machine business make?
The success of your vending business will be dependent upon location, location, and location. The busier the location, the better your vending machine business will do.

Do I have to offer the store owner a percentage of my vending sales?
This depends on the approach that you take. If you approach the owner as a vending machine business owner strictly interested in expanding your vending route, then it would be proper to offer them a percentage of the sales. Do not forget that offering a percentage is an incentive for the owner to allow you the space in their business. We recommend offering anywhere from 15% to 33%, depending on the location. Another approach that you could take is through charity. There are many charitable organizations that will supply you with stickers to put on your vending machines in exchange for a nominal monthly fee. Most store owners will allow you space in their stores for free when you are associated with a charitable organization.

Should I use a locating service to locate my vending machines?
Keep in mind that a location service charges to place machines, which will cut into your profits.  If you have the time to scout, securing quality locations for your vending machine business yourself will maximize your profit.

What are good locations for vending machines?
In our experience, certain businesses have consistently proven to be successful locations. These include restaurants, bowling alleys, skating rinks, shopping malls, Boys and Girls Clubs, laundromats, movie theaters, academic institutions (high schools, colleges), supermarkets, coffee shops, banks, automotive centers, taverns, and apartment complexes. Always be on the look out for more obscure locations that could prove to be really favorable. Some surprisingly successful locations that we have come across include auction facilities, casinos, bingo halls, horseback riding facilities, and airports. Remember, any place with steady foot traffic is a good location for a vending machine.

Do I need a business license or insurance to operate a vending machine business?
You should consult with your local licensing department to find out the specific rules and regulations pertaining to the vending business in Florida.

Once I place a machine, should I have the location owner sign some sort of contract?
This is up to you, but it’s never a bad idea to have a business agreement in writing.

Is theft and/or vandalism a big issue in the vending business?
Because bulk vending machines are typically placed in high visibility and high traffic locations where there are people or employees at all times, theft and vandalism is uncommon. If you are locating your machine in a questionable location, a simple and cost-effective solution would be to wrap a chain around the base of the machine and chain it to a fixture within the store. This simple solution would prevent any would-be thieves from attempting to steal your equipment. If you are purchasing a change machine, many models can be equipped with an alarm for an upgrade fee.

How often will I need to service my vending machine business and how long does it take to service?
We recommend that you check on your vending machines at least once a month. Servicing a vending machine business, which includes collecting the money and refilling the machine, takes about three minutes per machine. A vending business consisting of 100 machines could take as little as 6 hours a week or two weekends a month to fully service.

Do I need a truck or van to run a vending machine business?
No. Our spiral vending machines, bulk vending machines, and triple-vend machines easily fit within a standard vehicle.

Can I operate my vending machine business from my home?
Absolutely! There is absolutely no need for an expensive office or warehouse.

Raising Capital for Small Business

The Challenge of Raising Capital for Small Business

Raising capital is one of the most difficult challenges faced by today’s entrepreneurs.

  • Bank loans are very hard to get
  • Risk capital investors (angels and venture capital funds) expect high growth and rapid exit, which are not options for a huge majority of businesses
  • Complicated securities regulations place severe limits on who can invest

Strategies to Raise Capital

We have identified five strategies that allow you to raise money from both wealthy and non-wealthy investors in compliance with securities law. These are:

  • Direct Public Offerings (DPOs)
  • Private offerings
  • Special strategies for cooperatives
  • Fan-based funding (donations, pre-sales, memberships, etc.)
  • Grants and public-private partnerships

There’s more than one way to raise capital, and the very first option starts with you. If you’re not willing to invest in yourself, how can you expect anyone else to? Many successful entrepreneurs put nearly all their savings into their small business, and that helps catch the eye of investors because it’s clear you’re fully committed to the project. But what if you have hardly any capital to invest?

The vast majority of the time, it’s best to wait to launch until you at least have something to offer. Getting that first round of funding is often the most difficult, and lenders want to see that you’re serious. When it comes to raising capital and approaching funders, make sure you have a POA ready to go.

Here are some of the best ways to raise capital

1. Yourself 

There’s no getting around this one. Only in very rare instances can a startup happen with a founder investing $0 of his or her own money. It doesn’t have to be a fortune and the total sum is dependent on the startup and a variety of unique circumstances. However, consider it your bid to yourself and prioritize it.

2. Family and friends

This is the one that many entrepreneurs shy away from, but it’s actually the absolute best option. Don’t worry about sounding like you’re begging or putting your loved ones in an awkward position. If you present your pitch professionally and treat them like real investors (because they are), it will go smoothly even if you’re turned down. You might be surprised by who has extra cash and is interested in supporting your dreams.

3. Banks and traditional lenders 

Small business loans from traditional lenders (banks) can offer surprisingly great terms and interest rates. Of course, this depends on your credit profile and the type of collateral you can offer up. This is the reason why you need to have a well drafted business plan in place. From a traditional standpoint, this is your best bet for getting capital and you can help optimize your credit score at the same time. Plus, securing this loan helps other investors see that you’re a “real company.”

4. Crowdfunding

If for whatever reason you don’t qualify for a small business loan, there are oodles of crowd funding options available. Do your research and select a reputable company with a great success rate. This is a less orthodox approach, but it works wonderfully for many people in your position. Just make sure you carefully look at the terms and rates, and perhaps have a legal advisor chime in.

5. Investment companies and angel investors 

This is the cream of the crop and the most difficult to secure. Some investment companies have very clear directions for pitching while others will basically come to you as if by magic. To pique the interest of these lucrative investors, it’s all about PR and marketing even at this level. You might be exactly what they’re looking for, but not if you’re not visible.

Buy Florida Business Be Your Own Boss

Benefits of Becoming Your Own Boss – Buying a Florida Business

So you want to be your own boss. Consider the options – be an independent contractor…start your own Florida business…buy an existing Florida business.

Certainly there are pros and cons to each option. If you do a careful analysis, you’ll learn what many seasoned entrepreneurs have discovered…the risk-to-reward ratio is tipped in your favor when you purchase an existing Florida business.

Independent Contractor

As an independent contractor, your risk is minimal. The up front investment and overhead costs are limited. However, without the ability to leverage the work of an employee base, the returns are limited by your own personal capacity.

Starting Your Own Florida Business

Starting a business of your own can pay great dividends, but it’s important to understand that the risks are significant. Most start-up businesses will fail. According to Michael Gerber, author of The E-Myth Revisited, 40 percent of new businesses fail in the first year and 80 percent fail within five years.

Buying an Existing Florida Business

On the other hand, purchasing an existing Florida business reduces an entrepreneur’s risk while creating opportunities for tremendous profit.

There are a number of reasons to consider the purchase of an existing Florida business rather that starting one:

Proven Concept – Buying an established business is less risky – as a buyer you already know the process or concept works. Financing a purchase is often easier than securing funding for a start-up business for that very reason—the business has a track record. A bank will be able to look at the historical results for the business, not just rely on projections.

Brand – You’re buying a brand name. The on-going benefits of any marketing or networking the prior owner has done will transfer to you. When you have an established name in the business community, it’s easier to place cold calls and attract new business than with an unproven start up. That’s an intangible benefit that’s difficult to put a price on.

Relationships – With the purchase of an existing business, you will also be buying an existing customer base and vendor base that took years to build. It’s very common for the seller to stay on and transition with the business for a short time to transfer those relationships to the buyer.

Focus – When you buy a business, you can start working immediately and focus on improving and growing the business immediately. The seller has already laid the foundation and taken care of the time-consuming, tedious start up work. Starting a new business means spending a lot of time and money on basic items like computers, telephones, furniture and policies that don’t directly generate cash flow.

People – In an acquisition, one of the most valuable and important assets you’re buying is the people. It took the seller time to find those employees, develop them and assimilate them into the company culture. With the right team in place, just about anything is possible and you will have an easier time implementing growth strategies. Plus, with trained people in place you will have more liberty to take vacation, spend time with family, or work on other business ventures. When start-up owners and independent contractors go on vacation, the business goes too.

Cash flow – Typically, a sale is structured so you can cover the debt service, take a reasonable salary, and have some left over to take the business to the next level. Start up owners, on the other hand, often “starve” at first. Some experts say start-ups aren’t expected to make money for the first three years.

Risk – Even with all these advantages, some entrepreneurs believe it is cheaper, and therefore less risky, to start a business rather than to buy one. But risk is relative. A buyer may pay $1 million, for example, for an established business with strong cash flows of approximately $300,000 to $400,000. A lending institution funds the transaction because historical revenues show the cash flow can support the purchase price. For many people, however, that is far less risky than taking out a $300,000 loan with an unproven concept and projections that may or may not be realized.

Becoming your own boss always involves a risk. When you buy a business, you take a calculated risk that eliminates a lot of the pitfalls and potential for failure that come with a start up.

Looking for that special business? Look at the 1000′s of Florida businesses for sale at: http://floridabizmls.com/buy-a-business/south-florida-businesses-for-sale/

Florida Business Buyers

Enjoy the Flexibility and Benefits of Business Ownership

Florida Business Brokers have the resources to guide you to the right business.

We offer:

  • A huge selection of Florida businesses available for sale
  • Individualized business searches tailored to your needs
  • Expertise in the sale and purchase procedures
  • Assistance in obtaining financing
  • Expertise and assistance in negotiations and closings
  • Confidentiality
  • Making the deal happen