Buying an Established Business - How can you trust if a seller’s financial claims are genuine?
When you are looking at buying an established business, the seller may provide their earnings in one form or another. To verify the sellers’ financial claims, the first test is to ask for substantiation. If the seller cannot or will not back up the information – walk away – do not waste your time. You must be able to thoroughly research and investigate all the information.
Remember, there are many variables to calculate when buying an established business, so it is wise to ensure a close ‘working’ relationship is built so that everything is out in the open and you have peace of mind about all areas of the business.
On some occasions, the seller has a different figure to what is actually in the records. There may be a good reason for this – perhaps there is a percentage of cash which is not always recorded and not relied upon. It is up to you to look into this to ensure you understand why, what amount and when is it taken in.
Do not take anything at face value. The saying “you get what you inspect not what you expect” applies here.
When you do find a business that passes the 1st and 2nd stages of your inspection, you then do a comprehensive due diligence checklist, ready for the remainder of your inspection.
Most sellers are good honest people some however are extremely tricky.
A vital part of buying an established business is conducting the inspection using a comprehensive due diligence checklist. The financials of the business are most important and should be done carefully and at your own pace. Here are a couple of starting points before you go any further in the business buying process:
1/ Request to see previous years tax returns and general accounts documentation
2/ Ask for evidence of all discussions with the vendor eg. Purchases made, staff, suppliers, leasing agreement to name a few
All the information for every facet of the businesses must be carefully investigated before negotiating begins.
When Buying an Established Business - Take your time and don’t be persuaded to rush through your due-diligence checklist. This is a big decision and your future financial situation is at stake. If you’ve covered everything necessary, there will be far less room for error or even regrets.
Start off with all the information by using the Bizbuy Kit. You can simply step through the process with peace of mind and have the actual business valuation to measure the value of each business you are interested.
Everything you need to know about Buying a Business, Selling your Business and Valuing a Business so you can avoid common pitfalls and save thousands of hard earned dollars in the process
Monday, May 24, 2010
Monday, May 10, 2010
Buying an Established Business – Where do you go to Buy a Business?
Buying a business can be a little overwhelming. There are many places which list businesses for sale. The most obvious places to start are of course Newspapers and Trade Magazines; talk to business brokers, and ask your accountant or business advisor if they know of any potential businesses on the market.
Also, research businesses for sale online – It’s a good idea to list your requirements online and receive instant notification when something suitable comes on to the market.
If you are already in business and are looking at strategic acquisitions, you may find word of mouth a useful method – through customers, competitors and suppliers. Naturally this depends on the relationship you have with them.
Every once in a while you may come across a business you would just love to own that is not for sale and wonder how to approach the business owner. This type of sale happens more often than you would expect, but it must be done in the correct manner to ensure you buy at the right price.
1/ Buying a Business – What type of business can you see yourself owning and working in?
If your not sure and haven’t had a great amount of exposure to small business your first step is to find out more on the life of a small business owner, have a chat with some business owners and find out how their first few months were when they were new to the business.
How has buying a business changed their lives and what advice could they provide. Was their motivation to work in the business or run it at arms length?
Straight talk – unless you are looking at buying the business do not ever ask them personal questions such as how much the business turns over or anything regarding their financials as that’s like someone asking you how much you get paid.
Do not be hesitant to approach a business owner; you’ll be surprised just how much assistance business owners are willing to give you if you’re genuine and transparent about it. It's a good idea to be prepared and have a couple of questions ready ahead of time, by being tactful and considerate you’ll get some great insights on operating a business from successful business owners!
2/ Buying a Business – Are you a first time business buyer?
It’s very normal for first time business buyers to start feeling overwhelmed and a little hesitant about buying a business, if this is the case you might be more comfortable taking a look at a franchise.
Many first time business buyers feel that buying a franchise reduces the risk and provides them with additional and ongoing support from the franchisor.
3/ Buying a Business – Discover hundreds of different types of businesses for sale
Business buying and selling websites are popping up all over the place which is great for you. There are many sites to look at, here’s a few tips to help you research
- Use a search engine like Google and make sure you’re ‘googling’ in the Google site associated with the country you are looking to buy a business. e.g. www.google.com.au (Australia). This will show your local country pages first, making it easier to get to where you want fast.
- If you don’t know what type of business you’d like to buy, simply search for businesses for sale in the geographical area of choice.
- If you have a clear idea on the type of business you’d like to buy, then simply type the exact business for sale and geographical area.
- Make sure you don’t miss the Businesses for Sale By Owner sites – Google shows a healthy list of them, our research indicates that over 30% of the businesses offered for sale are for sale by the owner (you may see the abbreviation FSBO or DIY ) so Google the abbreviation.
Many smart business owners are now acquiring all the skills and information they need to successfully sell their own business without a business broker. This could be a huge benefit to you as the business buyer.
Buying a business successfully is really quite simple when you have all the information and a helping hand to guide you through the process without making avoidable mistakes. There are even some interesting ways to assess yourself to see if you are truly ready to run your own business. Checklists are available in the Bizbuykit and will prove valuable in your quest for a great business.
Also, research businesses for sale online – It’s a good idea to list your requirements online and receive instant notification when something suitable comes on to the market.
If you are already in business and are looking at strategic acquisitions, you may find word of mouth a useful method – through customers, competitors and suppliers. Naturally this depends on the relationship you have with them.
Every once in a while you may come across a business you would just love to own that is not for sale and wonder how to approach the business owner. This type of sale happens more often than you would expect, but it must be done in the correct manner to ensure you buy at the right price.
1/ Buying a Business – What type of business can you see yourself owning and working in?
If your not sure and haven’t had a great amount of exposure to small business your first step is to find out more on the life of a small business owner, have a chat with some business owners and find out how their first few months were when they were new to the business.
How has buying a business changed their lives and what advice could they provide. Was their motivation to work in the business or run it at arms length?
Straight talk – unless you are looking at buying the business do not ever ask them personal questions such as how much the business turns over or anything regarding their financials as that’s like someone asking you how much you get paid.
Do not be hesitant to approach a business owner; you’ll be surprised just how much assistance business owners are willing to give you if you’re genuine and transparent about it. It's a good idea to be prepared and have a couple of questions ready ahead of time, by being tactful and considerate you’ll get some great insights on operating a business from successful business owners!
2/ Buying a Business – Are you a first time business buyer?
It’s very normal for first time business buyers to start feeling overwhelmed and a little hesitant about buying a business, if this is the case you might be more comfortable taking a look at a franchise.
Many first time business buyers feel that buying a franchise reduces the risk and provides them with additional and ongoing support from the franchisor.
3/ Buying a Business – Discover hundreds of different types of businesses for sale
Business buying and selling websites are popping up all over the place which is great for you. There are many sites to look at, here’s a few tips to help you research
- Use a search engine like Google and make sure you’re ‘googling’ in the Google site associated with the country you are looking to buy a business. e.g. www.google.com.au (Australia). This will show your local country pages first, making it easier to get to where you want fast.
- If you don’t know what type of business you’d like to buy, simply search for businesses for sale in the geographical area of choice.
- If you have a clear idea on the type of business you’d like to buy, then simply type the exact business for sale and geographical area.
- Make sure you don’t miss the Businesses for Sale By Owner sites – Google shows a healthy list of them, our research indicates that over 30% of the businesses offered for sale are for sale by the owner (you may see the abbreviation FSBO or DIY ) so Google the abbreviation.
Many smart business owners are now acquiring all the skills and information they need to successfully sell their own business without a business broker. This could be a huge benefit to you as the business buyer.
Buying a business successfully is really quite simple when you have all the information and a helping hand to guide you through the process without making avoidable mistakes. There are even some interesting ways to assess yourself to see if you are truly ready to run your own business. Checklists are available in the Bizbuykit and will prove valuable in your quest for a great business.
Why would you Buy an Established Business vs. a Start-up?
Some experts have predicted that a good portion of the workforce will be working in a self-employment capacity in the next decade; business ownership is becoming increasingly more appealing to many people.
Entrepreneurship and small business can be risky for the inexperienced, however, a great way to reduce some of that risk is to buy an established business which has already demonstrated an ability to successfully operate and generate profit. Of course business buyers must also look at educating themselves on the business buying process to ensure they buy the right business at the correct business value.
Obviously a successfully established business comes at a price and generally you would expect to pay more to buy a business than to start one from scratch.
Looking at the financial side for a moment - It is estimated that less than 10% of all start-up businesses are able to successfully secure the financing required at the outset. This is due to the high level of perceived risk start-ups pose to lenders because every aspect of the business is unproven and certainly not appealing to most lenders.
Depending on the type of business, certain lenders may provide some level of funding however, it will be dependant on a number of factors such as the cash flow, numbers, assets - stock and the security you personally have available to offer the bank.
So, more and more business owners realise the difficulty in financing a business purchase and are open to genuine buyers negotiating for some level of vendor finance, business owners are also looking at different ways to package and present their business, hopeful to attract the right buyer.
It is obvious when you compare buying a business to starting your own your chances of success are still clearly best when you buy an established business.
Here are some key advantages of buying a business vs. start-up:
1/ Business processes and proven methods
2/ Proven products, services, sales strategies and marketing
3/ An established business generates cash flow day one
4/ An established business has much less chance of failure
5/ Customer base and Suppliers established
6/ Vendor will train and help a business buyer understand the business
7/ Vendor may assist the buyer with financing
8/ Lenders are more willing to finance an established business
9/ Business is already successful and credible
10/ Employees are there and should not require training
Securing affordable business financing is so much easier when buying an established business with a positive cash flow, consistent stability and a proven track record versus starting your own business because there is no history – it’s seen as ‘unknown’ territory. Having the ‘unknown’ details already established and worked out by the previous owner certainly lowers the risk value when buying a small business or company.
Also don’t forget an established business or company should already have a relationship with a business banking manager, if the banks view the business as a good customer they will be keen to retain the business, the current vendor normally is quite happy to make the introduction.
Be ready and armed with all the facts, strategies and tips direct from experts who have walked in your shoes and have your best interest in mind. You can have all the information you need to make a successful business buying decision without the pitfalls made by many business buyers - using the Bizbuy Kit.
Entrepreneurship and small business can be risky for the inexperienced, however, a great way to reduce some of that risk is to buy an established business which has already demonstrated an ability to successfully operate and generate profit. Of course business buyers must also look at educating themselves on the business buying process to ensure they buy the right business at the correct business value.
Obviously a successfully established business comes at a price and generally you would expect to pay more to buy a business than to start one from scratch.
Looking at the financial side for a moment - It is estimated that less than 10% of all start-up businesses are able to successfully secure the financing required at the outset. This is due to the high level of perceived risk start-ups pose to lenders because every aspect of the business is unproven and certainly not appealing to most lenders.
Depending on the type of business, certain lenders may provide some level of funding however, it will be dependant on a number of factors such as the cash flow, numbers, assets - stock and the security you personally have available to offer the bank.
So, more and more business owners realise the difficulty in financing a business purchase and are open to genuine buyers negotiating for some level of vendor finance, business owners are also looking at different ways to package and present their business, hopeful to attract the right buyer.
It is obvious when you compare buying a business to starting your own your chances of success are still clearly best when you buy an established business.
Here are some key advantages of buying a business vs. start-up:
1/ Business processes and proven methods
2/ Proven products, services, sales strategies and marketing
3/ An established business generates cash flow day one
4/ An established business has much less chance of failure
5/ Customer base and Suppliers established
6/ Vendor will train and help a business buyer understand the business
7/ Vendor may assist the buyer with financing
8/ Lenders are more willing to finance an established business
9/ Business is already successful and credible
10/ Employees are there and should not require training
Securing affordable business financing is so much easier when buying an established business with a positive cash flow, consistent stability and a proven track record versus starting your own business because there is no history – it’s seen as ‘unknown’ territory. Having the ‘unknown’ details already established and worked out by the previous owner certainly lowers the risk value when buying a small business or company.
Also don’t forget an established business or company should already have a relationship with a business banking manager, if the banks view the business as a good customer they will be keen to retain the business, the current vendor normally is quite happy to make the introduction.
Be ready and armed with all the facts, strategies and tips direct from experts who have walked in your shoes and have your best interest in mind. You can have all the information you need to make a successful business buying decision without the pitfalls made by many business buyers - using the Bizbuy Kit.
Monday, May 3, 2010
Selling Your Own Business - Small Business Exit Strategy Planning
Exit strategies are a crucial part of the planning process when selling your business. Even if you do not intend to sell your business, you need to have good exit strategies up your sleeve to avoid any complications later. Exit strategies can be your way of planning and managing your eventual departure from your business. Following are 4 key exit strategy tips for you to consider before selling your business:
1. Write down your business exit strategy plan in detail:
It is the foremost exit strategy you need to undertake. To realize your strategy! It is essential to first properly plan your exit strategy and stick to it.
Having a written plan will enable you to be in control of the process. You need to have a proper exit strategy plan to keep a track on your business proceedings. By making a plan and sticking to it, you will notice an immediate, positive impact on your business.
2. Know the right time to get out of your business:
It is a well-known fact that the best businesses to sell are the ones that are not time-dependent. Therefore, you need to have a sustainable, durable and predictable type of business to attract prospective buyers. You need to ask yourself certain questions such as ‘why exactly do I need to get out of my business?’ and ‘what do I need to get out of it?’.
3. Assemble and consult your advisory team:
To get the best deal and returns from your business, it will be beneficial for you to take your final call only after consulting your advisory team, who will provide you with all the necessary information. Your advisory team should include your business lawyer, accountant and business broker. You can also consult a tax professional and hire a personal financial advisor.
4. Try increasing your business value:
This is perhaps the most important exit strategy. Your business has to be in good shape to attract the prospective buyers.
Some of the factors that can have a major impact on your business' sale prospects are its profitability, durability, predictability and sustainability.
You need to work on improving these factors before deciding to sell your business. Not having an exit strategy plan may spell doom for your selling prospects. Therefore, it is advised that you consider the above-mentioned exit strategy tips before taking the final call.
For more information regarding exit strategy planning, deciding your business value and selling your own business, be fully prepared by using the BizSale Kit.
1. Write down your business exit strategy plan in detail:
It is the foremost exit strategy you need to undertake. To realize your strategy! It is essential to first properly plan your exit strategy and stick to it.
Having a written plan will enable you to be in control of the process. You need to have a proper exit strategy plan to keep a track on your business proceedings. By making a plan and sticking to it, you will notice an immediate, positive impact on your business.
2. Know the right time to get out of your business:
It is a well-known fact that the best businesses to sell are the ones that are not time-dependent. Therefore, you need to have a sustainable, durable and predictable type of business to attract prospective buyers. You need to ask yourself certain questions such as ‘why exactly do I need to get out of my business?’ and ‘what do I need to get out of it?’.
3. Assemble and consult your advisory team:
To get the best deal and returns from your business, it will be beneficial for you to take your final call only after consulting your advisory team, who will provide you with all the necessary information. Your advisory team should include your business lawyer, accountant and business broker. You can also consult a tax professional and hire a personal financial advisor.
4. Try increasing your business value:
This is perhaps the most important exit strategy. Your business has to be in good shape to attract the prospective buyers.
Some of the factors that can have a major impact on your business' sale prospects are its profitability, durability, predictability and sustainability.
You need to work on improving these factors before deciding to sell your business. Not having an exit strategy plan may spell doom for your selling prospects. Therefore, it is advised that you consider the above-mentioned exit strategy tips before taking the final call.
For more information regarding exit strategy planning, deciding your business value and selling your own business, be fully prepared by using the BizSale Kit.
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