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"What we can do
for you..."
Security
A big advantage
in buying an ongoing business is that you, as the new owner, have an
immediate cash flow and an established customer base.
You do not have to build a business; you simply take over an
existing, successful business with the present owner’s assistance.
Financing
We assist you in obtaining financing.
Banks are reluctant to finance business purchases for several
reasons. One, all small
businesses attempt to minimize profits shown on financial statements
to reduce tax liability. Also,
a bank cannot come in to manage a business if foreclosure becomes
necessary. Therefore,
over ninety percent of business purchases are financed by the owner
himself, which demonstrates his confidence in the business.
Confidentiality
Unlike the sale of real estate or franchises, the sale of an ongoing
business is very confidential for both the seller and the
prospective buyer. All
inquiries are held in strict confidence.
Meetings are confidential, and we are available after hours
and on weekends.
Things you should know...
We
at Coleman Bird Associates are advocates of finding a business that
you like and feel comfortable managing.
You, like every other prospective buyer, have a vision of
being your own boss and calling your own shots.
An old saying in the real estate industry is … “The three
most important things a buyer should look for are location, location
& location.” While
location is important to a business buyer, be aware that track
record and management round out the three components of a successful
business. Let us assume
that you find a business that you like and its location is fine, but
because of poor management, the business may not show the greatest
record of accomplishment. Purchased
for the right price and terms, this business could become more
successful with proper management making it a good way to achieve
your vision of being in business for yourself.
Tips for Buying the Right Business Right
- Buy
a business you like. Although
profitability is important, you will risk making a terrible
mistake if you do not buy a business that you like.
Often, people who buy hastily without considering
personal satisfaction later sell their businesses at a loss.
Will you be proud to own the business?
If you are not sure, do not buy that type of business.
- Be
flexible. We advise
our clients to be open to all sorts of businesses.
Do not lock your self into a McDonald’s or a Mailboxes,
etc. Who knows, you
may surprise yourself by taking a liking to a Blimpie or Signs
Now franchise. If
you lock into only one type of business, it will take you much
longer to find a business to buy.
Examine the following categories: retail; service;
manufacturing; distribution; restaurant; lounge; coin-operated
business. First,
decide if there are any categories that you do not want to be
in, then focus on the remaining categories.
- Do
not expect much financial information.
Do not expect “traditional” financial information
from the owner of a privately owned business.
The only accounting required of a privately owned
business is filing tax returns, which are prepared to report the
lowest possible tax liability.
There are other ways to verify cash flow later.
- Consider
chemistry. This may
seem like an unusual recommendation, but we tell our clients to
forget about buying a business if they do not like the current
owner. The buying
process is a long and somewhat complicated one -- it is
imperative that the buyer and seller work through it together.
- Go
with owner financing. The
owner of the business should finance the purchase.
In most cases, this is the sole source of financing
available to buyers of an existing business.
With owner financing, you can feel secure in believing
the owner’s representations as to income and expenses, and you
have a remedy if there are any problems after closing.
It also gives you a “silent partner” with a personal
stake in you success.
- Do
not pay cash. You
may not want a loan over your head, but do not pay all cash for
a business – even if you have it.
You should keep a stash on hand for emergencies and
business improvements. If
you insist on paying all cash, at least place some of the
purchase price in escrow for a period of time to protect
yourself from any problems that may surface after the closing.
- Make
an offer before you have seen all of the financial and other
business records of the business.
It is simply not possible to know everything about a
business before you make the initial offer.
The offer does not commit you to the business, but it
does let the seller know you are serious.
- Stay
calm. Buying a
business can be like dating.
You’ve got so many emotions going –
do you like the business, does the owner like you, is this
feasible, what does my family think, etc. – that you’re
bound to get a little flustered.
Keep your wits about you; you will need them.
Remain calm, and negotiate your offer with quite
reflection and reasoned discussions.
As you go through negotiations, always use this simple
formula: Cash Flow Available minus Annual Payments to Owner =
$$$ for you and your family.
If at any time during the negotiations this formula does
not result in enough money for you and your family, stop.
- Investigate
the business. Once
the owner has accepted your offer, the real work begins.
Verify cash flow and identify any hidden problems.
If you see red flags in either of these areas, change or
terminate your offer. There
should be stipulations in your offer that allow for this.
- Close
quickly. Once the
deal is made, try to close as quickly as possible.
You do not want owner to have second thoughts or news of
the sale to leak out to employees, suppliers and clients.
Advantages of Buying an Existing Business
-
Actual
results rather than pro-forma.
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Immediate
cash flow.
-
Trained
employees in place.
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Established
suppliers and credit.
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Established
customers and referral business.
-
Existing
licenses and permits.
-
Training
by the seller.
-
The
availability of owner financing.
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