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Acquisitions of existing businesses are at an all time high due to the immediate high returns and established business operations. Individuals, Corporations and Financial Buyer Groups are all actively scouring the countryside for existing businesses as a primary source of income and stability or to diversify their investment portfolios to balance the volatility of the stock market. It is usually much safer and more profitable to buy an existing business than starting a new venture. According to the Small Business Administration, over 50% of startup businesses fail due to unproven concepts, lack of working capital, and poor management.
Being able to review a company’s existing track record as reflected in P&Ls, Tax Returns and other Financial Records can be very helpful in determining cash flow available to a buyer. Growth potential can be measured based on actual experience rather than proformas associated with startup ventures.
The need for additional working capital is reduced due to the immediate cash flow being generated by the acquired company. Working capital needs for companies carrying substantial Accounts Receivables can often be addressed and rolled into SBA Loan project costs.
Obtaining trained and knowledgeable employees who are familiar with the business operation, local market and know the businesses customers and vendors.
Gaining established customers significantly reduces the time and marketing costs it would otherwise take to attract an adequate number of customers to support the overhead of a new operation.
Obtaining or transferring existing licenses and permits can often reduce the time and cost of making application, gathering information and conforming to required regulations, not to mention leasehold improvements already in place and operating as a turn key entity.
Sources of capital to purchase existing businesses are more readily available than startup ventures. It is also at times possible for the seller to finance a portion of the purchase price as long as they secure from a collateral viewpoint in their position as a lender. Banks and other financial institutions prefer to loan money for existing operations that have a proven track record than to fund high risk start-up ventures.
Ask for references of former clients and customers or obtain a recommendation from other professionals.
Is the Agent you are dealing with a full time, experienced business broker ?
As a Member of the Business Brokers of Florida and International Business Broker Association, brokers are obligated to adhere to practice standards and a code of ethics.
Based on your qualifications and acquisition criteria, a Business Broker will review with you several businesses that meet your needs. Profiles that provide a summary of the business and financial information will be provided after you sign a Confidentiality Agreement which is required by the Business Owner and the Broker.
While there are a number of ways to find businesses for sale, utilizing the services of a business broker can greatly expedite the process. Business brokers are experts in their industry and assist you in locating a company that meets your acquisition criteria in a prompt and professional manner. When selecting a company that specializes in selling businesses, verify the following information which will help ensure that you are properly investing your time and money.
When you meet with a Business Broker, be prepared to discuss your background, work experience and financial ability to purchase a business so that we can help you find a business that meets your needs. You will need to prepare a personal resume and financial statement which will be required by brokers, sellers, lenders, landlords and others who will be a party to the business acquisition. The following are examples of the questions a Business Broker will be asking you.
After reviewing the information on the business profiles, a Business Broker will answer any questions you may have about the businesses or will obtain the answers from persons deemed reliable. Once you select those businesses that you believe best meet your acquisition criteria, the Business Broker will schedule appointments with the business owners so you can see the facilities and operations.
At this point you have reviewed operating information and financial summaries of the businesses that meet your acquisition criteria, and you have met with the business owners and toured their business facilities. You should now be ready to select the business that you feel best meets your needs and begin the process of making an offer and entering a due diligence period. Checking out the business can be very time consuming for both you and the business owner.