Buyer Tips . . .
Purchasing Existing Businesses:
Not so long ago when a
person wanted to be their own boss, they did their research,
saved their money and eventually hung out a shingle for
themselves. With a lot of hard work and a little luck,
these entrepreneurs achieved varying levels of success.
How times change.
Across the country, the
entrepreneurial spirit still lives. In fact, more people are
striking out on their own than ever before, but how they make the
jump from employee to owner is what's news today. Many of
these new business owners are no longer starting from scratch.
Instead, a significant number are choosing to purchase one of the
more than 1.7 million existing businesses that for one reason or
another are up for sale on any given day across the country.
So why are business
acquisitions gaining in popularity? The main reason is money.
Often the only feasible way to break into a particular field, such
as a hotel or restaurant, is to buy an existing business.
Start up costs for many types of businesses prohibits ground-up
Many middle managers that have
been the victims of corporate downsizing are forced to open their
own businesses because they have difficulties finding a new job.
These seasoned veterans are often highly successful in their second
careers as business owners.
The advantages of acquiring an
existing business are many. Here are a few points to consider:
Buy a business and you
also buy its customers. The more customers, the more you
will pay for the business. Still, you'll have an
immediate cash flow and an opportunity to improve on
existing business relationships.
When you purchase an existing
business, you usually receive whatever merchandise is on the shelves
or in the warehouse. This will give you an idea of what sells
and what doesn't and allows you to spend your capital on other
necessary items such as advertising or payroll.
Once the business is yours, you
can keep any or all of the businesses employees. Seasoned,
knowledgeable employees can help you overcome the early jitters and
share with you any quirks or insider information that's vital to the
business or industry. There can be apprehension by the
existing employees, so this is an area of opportunity as will as
Good or bad, existing businesses already have an identity and an
image. You may have the opportunity to improve on an already
shining image or you may need to repair and improve a tarnished one.
Intangible assets such as an image are often one of the most
valuable and overlooked attributes of a business.
The most common reason people
state for not owning their own business is the lack of a down
payment and little start-up capital. However, commercial real
estate and business brokers who are knowledgeable about Small
Business Administration (SBA guaranteed loans have the ability to
offer their buyers the option of obtaining a long-term, highly
leveraged business loan for business acquisitions.
The SBA offers guarantees on
loans made through qualified lenders, with terms that are very
appealing to small business owners. Highlights can include:
high loan-to-value; fully amortized loans; terms of up to 25 years,
depending upon the use of the funds; no prepayment penalties; and,
competitive interest rates and fees.
As with any major financial
commitment, it is important to consult experts in the field to
protect and advise as the transaction progresses. Legal
questions ranging from property lines, labor union concerns, tax
issues are a very real part of business acquisitions and necessitate
the consultation of an experienced attorney and certified public
accountant. A few dollars invested early on can save you money
and grief down the road.
With prices ranging from a few
thousand dollars to a few million dollars, opportunities abound for
nearly anyone who wants to be their own boss. With careful
shopping and more than a little prudence, a business acquisition can
be the best way to be your own boss.