Buyers Ask Questions
According to some, owning your own business, has now become the new American Dream. Almost everywhere, anyone can own their own home. (your results may vary...) Even those from other countries come to the US with the American dream of having their own business and building their own fortune. A house comes later.
There is probably nothing so scary as buying someone's business. It's not like buying a house. If you overpay on a house, the market will catch up and you will break even. If you over pay on a business, you will either sink or swim. How long can you tread water?
The largest question on every buyer's mind is how much is it worth?
Well, who's asking and who's paying? If it is your money, a cash transaction, it is worth a different price than if the SBA is guaranteeing the loan and putting up the funds. If you are only putting up 10% of your own funds, it may very well have a different value.
If you do not understand valuation, hire a broker to evaluate the business for you. If the broker is selling the business for the seller, ask how he arrived at the value. (ask nicely!) If you are just starting to look, buy some books or valuation programs. A few hundred or a few thousand dollars spent now will save you much time and money later on down the road.
Do I need a lawyer?
Yes. Anyone that tells you no, ask for it in writing. The answer is still YES. Legally, no you don't need a lawyer. But yes you have to have one. Something will go wrong sometime, and you need a logical paper trail to follow. If you do have a problem later, you will get a lawyer then, and I want it on record that I recommended you seek competent legal counsel.
Do I need a business broker?
Are you buying or selling? Do you go to the Casino to gamble or just throw $20's out the window as you drive home on a Friday evening? Of course I'm going to say you need a broker! This is a broker site!
There are many very good sites out there to assist in the buying or selling of a business. BizBuySell is one of the leaders with a lot of help for both sides. They are as impartial as you can be as they do not get involved with either side. You can test the waters at a site like that to sell your business or explore the businesses for sale.
A broker's role is not driving you around showing you businesses until you say "Yup, I like that one..." A broker doesn't have time for that. He/She is spending their time looking for quality sellers and qualified buyers. Perhaps one of the reasons that only 10% of the businesses for sale ever sell, is that perhaps only 10% of the buyers are actually qualified to buy...
A broker may be representing the seller, the buyer, the transaction or is merely an intermediary. You need to ask up front and GET IT in writing. Local laws and customs vary.
Should I start a business or buy one?
Which do you have more of, time or money? Most new businesses will take 30 months to show a profit. During those 30 months, you need to be able to put ALL your time and energy into the business. You need to be able to feed the business more money, carry the expenses and not pay yourself. If you have employees, they need to be paid. Many businesses break even with existing expenses at the 18-24 month mark.
After the business is showing a profit, it can take another 12-18 months to recoup the losses of the first two years. Then, you are even. From that point on, it's all gravy!
So, which do you have, time or money...
Business Buyer Resource Center - "Learn 100s of tips, strategies and techniques to help you find and buy the right business".
Bizology - the study of business for sale
Bizology.com email to : info [at] bizology [dot] com Chambersburg, PA 17201-1712 * SELLING * FOR SALE * CONTRACTS - FORMS * FINANCIAL * REFERENCE * * TAX - LEGAL * * BUYING * | you are in buying index now |
business checklist | business information sheet | buyers ask questions | buyers cash requirements | buyer disclosure | buyer information | buyer memorandum | buyer resources |due diligence checklist | confidential buyer profile | escrow deposit | food service | how to evaluate a business | let's see the books | pre-paids | ratios | thank you | terms of the trade | what happened to seller financing | where's the value | what to look for | valuation program | HOME main index 