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 don’t have to build a business; you simply take over an existing successful business with the present owner’s assistance. A business that has been established for 3 years has a much better success rate than starting on your own.
Have you considered being your own boss, creating your own financial independence and making your own dreams a reality? You’re not alone, owning your own business is the “American dream”. But the reality is that buying a business is a serious financial and personal commitment that requires an understanding of what makes a business successful. All too often, new owners jump blindly into a business venture, overwhelmed by the tremendous workload of starting a business from the ground up. A government survey shows that 60% of new businesses fail within the first three years. An existing, established business that is purchased by a new owner shows a much lower failure rate.
If you have considered the thought of owning your own business, buying an existing business has many advantages over building a business from scratch:
Business Brokers of San Antonio (BBofSA) understands the reasons a good business succeeds. From understanding the reasons an ongoing business can provide a positive cash flow, to the value of an established name, location and customer base, to the inner workings of new owner financing and sealing the deal – BBofSA can make your dreams reality. Although we represent the sellers on our listings, we can help provide guidance on the complicated process of business transition. You will need to get your own advisors such as a CPA and attorney to help with your investigation and due diligence of the business you wish to acquire.
Unlike the sale of real estate or franchises, the sale of an on-going business is very confidential for both the seller and the prospective buyer. All inquiries are held in strict confidence. Meetings and information shared or observed are to be held in strict confidence. To ensure confidentiality for all parties, Business Brokers of San Antonio requires a confidentiality agreement to be signed.
In return for granting you, the prospective buyer, access to investigate the operations of the seller’s business and otherwise private information, the prospective buyer promises to use the information for the sole purpose of evaluating the benefits and risks of purchasing the seller’s business in strict confidence.
It is a tough lending environment right now. Brokers can put you in contact with professionals that skillfully negotiate financing and formulate a financial plan that works for you. Due to a banks reluctance to finance small businesses, most business purchases are financed by the current owners, demonstrating their confidence in the continued success of their business. Financing a business purchase through an owner vs. through a bank can bring a lower interest rate, lower payment plan, simple credit checks, using the business as collateral for the loan and greater owner commitment to your success.
Many business buyers think the most important quality in a business is profitability. Certainly, you want a business that will have sufficient earnings to provide for you and your family. BUT, you will risk making a terrible mistake if you do not BUY A BUSINESS YOU LIKE. Buying is business is about LIFESTYLE.
Suppose you find a septic tank cleaning business that makes lots of money and can be purchased for a reasonable price with great terms. Unless you want to pump septic tanks, the fact that the business makes lots of money is of no importance at all. If you bought this business because of the income, you will spend long, miserable days in the business and will end up neglecting the business and selling it later at a loss.
When you think about buying a business, think about what you like and don’t like. If you fix on a particular type of business, visualize yourself running the business. Visualize taking your friends and relatives to see your business. Do you like what you see? Will you be proud to own the business? If not, or if you are not sure, don’t buy that type of business.
You will have to be flexible in finding a business. If you lock onto only one type of business, it will take you much longer to find a business to buy. We like to start a buyer thinking about what they like and don’t like using the following broad categories of businesses. First decide if there are any categories that you absolutely do not want to be in. Then focus on the remaining categories and review the characteristics of these categories as presented below.
Once you have selected a primary category, you can begin to look for a business in earnest. You will find many different businesses within each category that share the primary characteristics of the broad category. You will then have to “fine tune” your selection. For example, within the retail category, we have clothing stores, shoe stores, boutiques of all types, bicycle shops, etc. Within the restaurant category, you can choose from full service restaurants to ice cream stores. JUST BE SURE YOU LIKE IT BEFORE YOU BUY IT!