Buying a Business-
A New Entrepreneurial Trend
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 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 prohibit ground-up construction.
Many middle managers who 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
Once the business is yours, you can keep any or all of the business'
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 well as concern.
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 with no balloon payments; 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, to labor union concerns to tax issues are
a very real part of business acquisitions and necessitates 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, 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.
- David W. Moore, Jr.
- Norfolk, VA
- (757) 640-7592
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