Buying a Franchise - Mistakes to Avoid

Many mistakes that people make are predictable. To help you to avoid making them, FranNet has compiled a list of ten of the dumbest mistakes you can make when going into business. Remember these are mistakes others have made, so take advantage of our experience and save yourself from some potential problems! 


• Don’t overextend financially when buying a franchise. 

• Don’t start to look until you have an idea of what you’re looking for. 

• Don’t assume that starting a business is easy! 

• Don’t try to go it alone. Use Experts.

• Don’t forget about a business plan.

• Don’t pick a business because “there are so many of them, they must be good.”

• Don’t skip talking with the other franchisees.

• Don’t put it on your credit card.

• Don’t pick the business your dad (or spouse) likes best.

• Don’t fall in love with the product.

For a complimentary consultation:
Contact  Cecil Williams (cecil@bizbrokerflorida.com) or call  at 888-925-5055 ext.206.  Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com  Also, visit our Florida Business Exchange website at www.fbxbrokers.com

Increase the Chances of Selling Your Business - Tips from a Valuation Expert

Want to Sell Your Business? Tips from a Valuation Expert

After you have built up your business, you might decide -- at some point -- that it's time to sell. Indeed, if you are getting close to a major life transition, selling can seem attractive.
If you believe that you are ready to sell your business, however, you should be prepared to protect yourself and be ready for what's next.
Recently, I spoke with Allan Siposs, Managing Director and Head of FMV Capital Markets. Among the services offered by FMV is business valuation. Siposs knows what it takes to get an equitable deal when you sell your company, and he shared some of his tips.

Deals Are Still Getting Done

"First of all, there is this belief that there are no deals getting done right now," Siposs said. "This isn't true. There is a tremendous amount of interest from private equity investors and strategic investors and other buyers. You need to prepare, though, if you want to attract buyers."
One of the ways to prepare is to think about what might be a concern for a buyer. "Look at what might be a problem from a buyer standpoint," Siposs suggested. "If most of your revenue is tied up with one customer, you might have a problem when going up against someone with diverse revenue. What about transition management? Is your company too tied up with you? Look at accounting issues, and also look for issues with OSHA or the EPA."
After identifying these issues, it is up to you to address them, and make changes. Look for these issues well in advance, so that you can have them in hand before buyers start looking into your operation.
Siposs also pointed out that you need to make sure you have a competitive process. "You should be entertaining more than one buyer. Consider retaining someone to represent you, and help you identify buyers that might have an interest in your business. You want to make sure that you have someone knowledgeable in your corner, helping you get the best possible deal."

It's Not Just About the Numbers

Sometimes, the best possible deal isn't about the number. "You need to look at the structure of the deal as well. Business owners can get so hung up on a number, that they forget to look at the structure of the agreement, which can include contingencies, payment structure, and other compensation," Siposs said. "Many business owners end up surprised that the structure of the agreement means that, even though they got the amount they wanted, their actual payout is somewhat low."
In addition to actual pay, Siposs said that business owners also need to pay attention to who will control the company after it is sold. If you want to remain involved, this is especially important. "You need to know how you will get paid, who will be in control, and how you can get your company back if you don't like how things are going," he said.
Finally, make sure there is a very good confidentiality and non-solicitation agreement in place. "You don't want potential buyers to be able to use anything against you," Siposs pointed out. "Before you reveal anything about your financials, or any other details about your business, make sure that you have the right protective agreements in place."
It is possible to sell your company now -- and get a good price. However, you shouldn't just put it out there. Plan ahead so that you can make your business attractive, and so that you can protect yourself. Otherwise, you might end up getting the short end of the stick.

Source: Want to Sell Your Business? Tips From A Valuation Expert

For a complimentary consultation:
Contact  Cecil Williams (cecil@bizbrokerflorida.com) or call  at 888-925-5055 ext.206.  Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com  Also, visit our Florida Business Exchange website at www.fbxbrokers.com

How does the business valuation process work?, Buying a Business or Franchise Article | Inc.com

How does the business valuation process work?: 

This article is a response to the question "how does the business valuation process work?" The response is from Tom West who is considered by most as one of the knowledgeable expert in the field of business transfers.

Read: How does the business valuation process work?

 

For a complimentary consultation:
Contact  Cecil Williams (cecil@bizbrokerflorida.com) or call  at 888-925-5055 ext.206.  Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com  Also, visit our Florida Business Exchange website at www.fbxbrokers.com

Is Entrepreneurship Right For You?

Is Entrepreneurship Right For You?:

Corporate downsizing, can't find a job, or just chasing a dream leads to the consideration of being an entrepreneur and results in calls to a business broker. Some of these aspiring entrepreneurs come built for the challenge, but others frankly need to find a good job and be happy. Which one are you?

Read: Is Entrepreneurship Right For You?

For a complimentary consultation:
Contact  Cecil Williams (cecil@bizbrokerflorida.com) or call  at 888-925-5055 ext.206.  Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com  Also, visit our Florida Business Exchange website at www.fbxbrokers.com

Prep Your Business In Order To Get Your Asking Price

While most home owners take the time and money to prepare a house to be marketed and sold, few business owners adequately prep their business when selling it. Business owners should attempt to look at their business through the eyes of a potential buyer. The business broker will make that perspective the focus of the business owner in valuing and preparing the business for sale.

This article is one that could serve as a guide to those considering selling their business, and provides critical insights to enable the seller to receive the best price for their business.

Read: Getting a good price for your business: How to prep your company for sale 

For a complimentary consultation:
Contact  Cecil Williams (cecil@bizbrokerflorida.com) or call  at 888-925-5055 ext.206.  Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com  Also, visit our Florida Business Exchange website at www.fbxbrokers.com

How To Get Your Asking Price When Selling Your Business

Most people don’t realize that for most business owners that is seldom a successors to continue their business when they decide it’s time for them to quit. That fact makes selling a business the most viable exit strategy for business owners.  Selling the business allows the business owner to achieve converting the business into liquid assets and getting a return of their investment of time and money.

Whatever the reason for selling, following these tips for selling a business will help ensure that you get the best price and that your business sells.

1) Sell at the right time for the right reasons.

The number one reason for selling a business is that a business owner falls ill or gets too old to continue to run it – that is the worst time to be selling a business. This situation creates two tremendous issues; 1) it's going to be extremely difficult to deal with the additional stress of selling a business in those circumstances and 2) the buyer will use your circumstances as leverage against you.

Don't wait too long to sell. The best time to sell is when business is good. Don't wait until poor health, divorce, or a downturn occurs" to sell your business. Look to sell from a strong position, on terms you can determine. 

2) Be clear about what you're selling.

Most business transfer transactions are asset sales. So, before selling a business consider what all the assets are (tangible and intangible), and decide what you are selling. Determine what physical (tangible) assets you are selling and what other assets (intangible) you have to sell. Selling a business often includes assets such as goodwill, trademarks or client lists as well as physical  

3) Determine what your business is actually worth.

Your business is worth as much as a buyer is willing to pay in the marketplace. However, determining the initial asking price is critical. There are several business valuation approaches ranging from asset-based to future earnings approaches. No one approach can be used in isolation; the current market, economic trends and what other similar businesses have sold for also need to be taken into account.

Ensuring that a professional valuation is done should be among the first step in selling a business.

4) Make sure your house is in order.

Keep good records and have them prepared for your broker and prospective buyers. Keeping the business's records up to date, the inventory up and the premises maintained are crucial. Good financial records and other business documentation can help expedite the buyer’s due diligence process and increase the chances of a victorious and lucrative sale.

Run the business as usual or better. It is critical that your business maintains the level of operation as usual and continues to produce the financial results shown in the business profile during the selling process. It is imperative that your business maintains the level of operation as usual and continues to produce the financial results shown in the business profile. If your performance slips, it will turn up during Due Diligence and either kill the deal or affect your selling price.

One Last Tip for Selling a Business

Selling a business is the most complex business transaction most people will ever experience. Therefore have professional assistance is key to ensuring the best outcome. Use a professional Business Broker to sell your business. Your business Broker should belong to a professional organization such as the IBBA (International Business Brokers Association and in Florida, Business Broker of Florida (BBF). These organizations have established professional ethics and rules for their members in addition to training for members to make certain they are knowledgeable, competent, and abide by the highest professional ethics.

Any business owner who has sold a business on his of her own will tell you it’s a long, tedious and stressful process.  It consumes time and distracts you from the day to day operation of the business.  When your focus should be on maintaining or increasing the value of your business, all of your time and energy is directed to the sale process.

That’s where an experienced business broker can pay huge dividends.  An experience business broker can help guide you through the complicated process of selling your business. While you focus on continuing to operate your business, your broker will assist with determining the asking price, executing a marketing plan, qualifying buyers, preparing offers, negotiations, and completing the entire transaction to a successful close.

For a complimentary consultation:
Contact  Cecil Williams (cecil@bizbrokerflorida.com) or call  at 888-925-5055 ext.206.  Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com  Also, visit our Florida Business Exchange website at www.fbxbrokers.com

Understanding Why The Business Is For Sale - Critical For The Buyer

Being able to determine the validity of a seller’s answer to the question why a business is for sale is crucial to a buyer’s return on their investment of capital and time in the transaction.

Whatever answers the seller provides to this key question, a buyer should continually validate that answer with direct and indirect probing questions during interactions with the seller, until a complete comfort level is reached.

Here are some of the most common reasons business owners sell their businesses, and some of these are never honestly disclosed to the buyer. Remember, it’s the buyer's responsible to ensure an understanding of the “why” question, whether disclosed or not by the seller.

• Retirement
• Need funds to finance another venture
• Tension between management and/or staff
• Sick of dealing with bureaucracy
• Not generating enough income 
• In anticipation of impending changes likely to make the industry more challenging (e.g., exiting DVD rental sector might have been shrewd move in recent years as online download market accelerated)
• Economic downturn
• Fulfillment of a long-term exit; hit profit and revenue targets 
• Ideal juncture in the economic cycle
• Perception that business is at its peak; value will never be higher

For a complimentary consultation:
Contact  Cecil Williams (cecil@bizbrokerflorida.com) or call  at 888-925-5055 ext.206.  Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com  Also, visit our Florida Business Exchange website at www.fbxbrokers.com

Advice For Thought Thinking About Selling a Small Business

Entrepreneurs invest thousands of hours when nurturing and building a successful business. However (or unfortunately) when it comes time to sell that business, most business owners underestimate the complexity of the process and the time required for a sale.

Here are several tried and tested keys for business owners contemplating selling their business:

Seek advice from a knowledgeable business broker about the value of your business.

Use a professional Business Broker to sell your business. Your business Broker should belong to a professional organization such as the IBBA (International Business Brokers Association and in Florida, Business Broker of Florida (BBF). These organizations have established professional ethics and rules for their members in addition to training for members to make certain they are knowledgeable, competent, and abide by the highest professional ethics.

Support your broker. Your broker can’t help your business without your help. Your continued support during the buyer meetings, negotiations, and due diligence is absolutely crucial to closing the deal. A business owner selling their business needs to respond quickly to inquires, offers, and with paperwork because timing can make or break deals.

Allow adequate time to sell your business. Selling a business is significantly more difficult and complex transaction for both the seller and buyer. The amount of time your business remains on the market is impacted by a number of factors: the current market both nationally and in your state, the type of business or industry, and the size of your business. Yes some businesses sell quickly, however most business owners should anticipate up to six months and allow up to a year to finalize a sale.

Keep good records and have them prepared for your broker and prospective buyers. Good financial records and other business documentation can help expedite the buyer’s due diligence process and increase the chances of a victorious and lucrative sale.

Run the business as usual or better. It is critical that your business maintains the level of operation as usual and continues to produce the financial results shown in the business profile during the selling process. If your performance declines, it will turn up during due diligence and either impact the deal closing or affect your selling price.

For a complimentary consultation:
Contact  Cecil Williams (cecil@bizbrokerflorida.com) or call  at 888-925-5055 ext.206.  Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com  Also, visit our Florida Business Exchange website at www.fbxbrokers.com

Why Waiting to Sell Your Business Might Backfire

Why Waiting to Sell Your Business Might Backfire

Waiting for the market to recover could backfire, according to some who study small-business valuations. If and when the economy brightens, there could be a hefty backlog of retirement-age small-business owners eager to sell out, competing with newer sellers for the same group of buyers. If you plan to continue waiting, at least become educated on what's involving is selling your business and what businesses like yours are selling for.

Read: Why Waiting to Sell Your Business Might Backfire

For a complimentary consultation:
Contact Cecil Williams (cecil@bizbrokerflorida.com) or call  at 888-925-5055 ext.206.  Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com  Also, visit our Florida Business Exchange website at www.fbxbrokers.com

Valuation - The First Step Towards Selling Your Business

Question: "I have a medium sized company which I have owned for about 20 years. We specialize in the manufacture and distribution of chemical products and have built a good business. However, my children aren't involved or interested in the business so I am considering selling it. The problem is that I have no idea how to begin the process."

Since most business owners only sell a company once in their lifetime, it is quite understandable when an owner makes such an inquiry. While the thought of selling their company may seem overwhelming to many business owners, if thought in terms of small steps instead of giant leaps, it is really quite simple.

What is the initial question that comes to mind when you think about selling your business? One might guess that you wonder how much someone would pay for it.

Well, your first thought is the very first step you should take towards the ultimate goal of selling your business. Get a valuation to get an objective price range that you could expect to receive in the marketplace. It's that simple.

Typically, the documents needed to determine the preliminary most probable price range of a company are tax returns and financials for the most recent three to five years, current year-to-date financials, and an equipment list. Again, as you can readily see, the required items for a valuation is not complicated. Several years of financials helps paint a historical picture and current trend of the company. Upward trends are the desired scenario.

Since profits on financial statements and tax returns of privately-held businesses are usually minimized in order to reduce income taxes, the financial statements are restated in a valuation to demonstrate the actual income-generating ability and financial performance of the business.

As part of that process, a professional business broker / intermediary will ask easily-answered questions that will help determine which expenses are discretionary in nature or are not strictly necessary. There will be other expenses that may be non-business related benefits going to the owner and family members, or one-time, non-recurring or unusual expenses that would not be borne by a new owner of the business. These expenses will be part of the true discretionary cash flow that would be enjoyed by a new owner.

This valuation should clearly outline the details that buyer prospects and their advisors would need and can understand. It should be assessed on the same premises lending institutions use for the purpose of determining if the price makes sense.

Formalized business valuations or appraisals of a business in a self-contained written report are sometimes required. This type of valuation is known as an Appraisal Report. If a valuation has the potential to go to court, or if the report needs to be reviewed by others, such as the IRS for tax implications, this type of report explains in full detail how the value was derived. .

Just as an athlete might get a physical to determine their preparedness for a marathon, you should also measure your Company's fitness for the marketplace. A valuation is an unbiased examination of your company's marketability and helps you pinpoint where your company is in its business cycle. It is the foundation, the meat and bones, on which a business owner can base their readiness to sell.

Other considerations in determining the business value will include competition, regional demand factors, proprietary products or processes, what type of buyer type of buyer the company would attract, favorable lease terms, advantageous supplier relationships, management's desire to exit or stay with the business, concentration of customers, and many other relevant factors.

Your company's history of earnings represents its financial health and can establish the baseline for the monetary worth of the enterprise. The single most important factor for valuation is how much money the business makes. This figure should be maximized and be shown to be maintainable under new ownership in order to get the best price possible when the time is right. Buyers pay for the past, but buy for the future.

Most owners never take the necessary steps to plan their exit and end up selling because of unexpected events or crisis-driven reasons rather than on their own terms. According to members of the International Business Broker Association, 75% of business owners do not know the market value of their company. This is too large a number considering how painless a task it is to achieve.

The sooner you take the first step in determining the value of your business, the more informed and comfortable you will be in planning your next step.....whether it be deciding the time is right to sell now, or making improvements for a future sale.

Understanding the value and what drives the value of your business is the next stride in the small-step approach.

   
Written by Certified Business Brokers (CBB)


For a complimentary consultation:
Contact  Cecil Williams (cecil@bizbrokerflorida.com) or call  at 888-925-5055 ext.206.  Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com  Also, visit our Florida Business Exchange website at www.fbxbrokers.com

Things to Consider when Buying a Business

Things to Consider when Buying a Business:

 An attorney offer 6 key (and basic) considerations everyone buying a business needed to cover. 

Read: Things to Consider when Buying a Business

For a complimentary consultation:
Contact Cecil Williams (cecil@bizbrokerflorida.com) or call  at 888-925-5055 ext.206.  Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com  Also, visit our Florida Business Exchange website at www.fbxbrokers.com

Read: How To Sell A Restaurant

How To Sell A Restaurant

Excellent insights into preparing to sell a restaurant and increasing the value and chance of selling it.

Read:  How To Sell A Restaurant

For a complimentary consultation:
Contact Cecil Williams (cecil@bizbrokerflorida.com) or call  at 888-925-5055 ext.206.  Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com  Also, visit our Florida Business Exchange website at www.fbxbrokers.com

3 Must-have Agreements When Selling Your Business

3 Must-have Agreements When Selling Your Business:

This article discusses the:

1. Purchase Agreement

2. Confidentiality Agreement

3. Non-compete Agreement

3 Must-have Agreements When Selling Your Business | Small Business Support:

For a complimentary consultation:
Contact Cecil Williams (cecil@bizbrokerflorida.com) or call  at 888-925-5055 ext.206.  Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com  Also, visit our Florida Business Exchange website at www.fbxbrokers.com

What Is the Most Important Number For Buyers

When doing a valuation for making a SBA 7a loan, the lender is going to utilize methods that analysis income. The most common evaluation methods are 1) Multiple of Seller's Discretionary Earning (SDE), Discounted Future Cash Flow, Capitalization of Earnings (EBITDA), and Excess Earnings Method. While I can run an spreadsheet model for all these methods for individuals selling or buying a business in Florida, I find that most businesses are valued and sell within the range of the values generated utilizing the Capitalization of Earning (EDITDA) and Multiple of Seller's Discretionary Earning (SDE) methods.

The reasons that these two methods provide the optimum valuation and selling range are:

• They both evaluate cash flowing through the business

• They provide the lender and buyer with enough information to know if the business generates cash to pay down debt, pay the buyer a salary after closing, and to determine ROI.

Which of these two methods is most useful? It depends.

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) is the figure that offers a fairly reliable estimate of the kind of cash a business generates to pay down debt, pay taxes and offer a return to investors.

Sellers' Discretionary Earning (SDE) or Seller's Discretionary Cash Flow (SDCF), on the other hand, is a figure used more often in smaller businesses because it accounts for the salary that the company's owner pays himself, along with any other benefits or perks like a company car or life insurance policy.

In other words, SDE = EBITDA + owner's salary + perks and benefits.

For a complimentary consultation:
Contact Cecil Williams (cecil@bizbrokerflorida.com) or call  at 888-925-5055 ext.206.  Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com  Also, visit our Florida Business Exchange website at www.fbxbrokers.com

3 Questions to Ask Before Selling Your Business

3 Questions to Ask Before Selling Your Business

Running a business can be exhausting. It's no surprise that even the most successful entrepreneurs feel at times that cashing out – selling the business to someone else or another company – might be the best way to maintain their mental health as well as their financial well-being.

But is selling a business worth considering during a weak economy?

The answer, according to experts, is a resounding yes.

"I could sell a hula-hoop manufacturer if it's priced right and marketed professionally," said Philip Pearl, a Ramsey, N.J., business broker and accountant.

To get the best deal on your business in any economic environment, ask yourself these three questions:

1. Will my business be as successful when someone else owns it?

The success of certain businesses is tied unalterably to their owners' personalities and customer relationships. "Mary's cookies may be great, but can Tom sell Mary's cookies? If not, her business is less valuable to a buyer," said Pankaj Amin, a New York-based entrepreneur who purchased a telecommunications business and sold it seven years later.

Mary may change the equation, though, by agreeing to continue running the business after selling it. Self-employed professionals such as lawyers may find this method useful, said Peter Raffalski, a vice president at Gibraltar Private Bank & Trust, based in Coral Gables, Fla. For example, a small law firm that specializes in bankruptcy proceedings might garner the attention of a larger firm that focused until recently on real estate closings.

2. How will the weak economy affect my business's value?

What a business is worth – always a source of contention between a buyer and seller – is usually settled around a multiple of the business's earnings, Amin said.

Even businesses whose sales have dipped recently may prove an attractive acquisition target, even more than some businesses that are suddenly enjoying brisk sales.

Pearl said that when a business broker and client look into buying such a business, they try to determine whether its fortunes will improve in better economic times.

Owners who find a potential buyer willing to take a long view of earnings should keep in mind that such a view cuts both ways: A short-lived sales surge won't mask the years of anemic growth that preceded it.

Pearl has worked with such a business. "Their growth spurt was so high that if I were to try and market the business based on this last year, buyers wouldn't accept it," he said.

3. Would selling help me meet my personal goals?

This is one of the key questions Gibraltar's Raffalski asks of business owners seeking his advice. Preparing to sell is wise for owners who seek to retire soon and for entrepreneurs who specialize in starting a business, bringing it to profitability and handing it off, Raffalski said.

For other owners, however, acquisition offers can lead to decisions they'll later regret, Raffalski said.

"Let's say someone is running an insurance business," Raffalski said. "He receives an offer to buy that he wasn't expecting. He thinks to himself, 'What would I do if I don't want to start a new business?' He can't just pick up where he left off. Sometimes the timing is wrong for personal reasons."

For a complimentary consultation:
Contact Cecil Williams (cecil@bizbrokerflorida.com) or call  at 888-925-5055 ext.206.  Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com  Also, visit our Florida Business Exchange website at www.fbxbrokers.com

Why Buy An Existing Business?

Why Buy an Existing Business?

To start a business or buy an existing business - this is the key question to answer before embarking into business ownership.

Read: Why Buy an Existing Business? « Cosmic Adviser

For a complimentary consultation:
Contact Cecil Williams (cecil@bizbrokerflorida.com) or call  at 888-925-5055 ext.206.  Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com  Also, visit our Florida Business Exchange website at www.fbxbrokers.com

10 Tips for Buyers of a Business

10 Tips for Buyers of a Business

Tip number 1, Buy an existing business: Sure, you can start a business from scratch, but your chance of failure is drastically increased. Buying a well established business with an existing client base and a proven cash flow is a lot less risky and your chances of “making it” are much higher.

Tip number 2, Decide what type of business to buy: It is important to buy something that you can enjoy owning at a location that you can live with. If you hate pizza, don’t buy a pizza shop. Buy something that you will be happy owning. If you hate the city of Philadelphia, don’t buy a business in the city of Philadelphia. Buy one in Florida. My office gets calls all the time from buyers who have no idea what they want to buy or where they want to buy. It seems as if they concentrate more on the cash flow number. While cash flow is undoubtedly an important variable, it should not be the single most important factor in deciding to buy a business. Decide whether you want a service based, retail based or manufacturing based company.

Tip number 3, Determine whether you can afford to buy a business: Many people never make the leap because they think that buying a business is a financial impossibility for them. The truth is, typically you do need some money, but perhaps not as much as you think. There are several options for financing the purchase of a business. An SBA (Small Business Administration Loan) can usually be acquired if you have a good credit score, some relative experience in the type of business that you want to buy and 20% of the purchase price. The purchase can also be funded with seller financing in the form of a promissory note or an installment purchase agreement. A purchase can even be funded through your 401k or IRA.

Tip number 4, Surround yourself with professionals: Buying a business is probably one of the most important events in a person’s life. It is important to surround oneself with the appropriate professionals. There are three key individuals that you should use to assist you in buying a business; they are a business broker, an attorney and an accountant. Business brokers are instrumental with identifying businesses, negotiating the price, and getting everyone to the closing table. Most business brokers have an attorney that they work closely with. You should be somewhat careful with going with that attorney. They will be torn between protecting your interest and making sure they don’t muddy the waters too bad essentially dissuading the broker from sending them more work. Regardless, you should choose an attorney that has experience with business transactions. Do not use your relative or close friend that happens to be an attorney if they specialize in something other than transactional law. You don’t need a powerful Tampa attorney, but an attorney with knowledge of Asset Purchase Agreements is a must. A CPA can be instrumental in the due diligence phase of the purchase. They will scour the books and records of the company to make sure the represented revenue and cash flow numbers are accurate. They can also educate you as to the tax implications for the allocation of the purchase price. Most major life events require the assistant of professionals, buying a business is no different.

Tip number 5, Identifying the Business: Once you have identified what kind of business that you want to own and the location you want to be in, the next step is finding a business that meets your criteria. There is no magic list of businesses that are closely held to the chest of businesses brokers. Usually, most businesses are advertised on the Internet on two key websites, www.bizbuysell.com and www.bizquest.com. While it may be true that some brokers don’t publicly advertise some businesses because some Sellers want the utmost confidentiality, most brokers list their businesses for sale on those two sites. You or your broker should complete a search to locate businesses that fit your profile. Try to find businesses of the type that you desire that are throwing off enough cash flow to sustain your personal obligations and give you the ability to grow the business.

Tip number 6, Prepare questions for the Seller. There are several key questions that a potential buyer should ask every Seller. The first, why are you selling? This is the most common question of the initial meeting. Sellers decide to sell for a variety of different reasons. The best-case scenario is that they are retiring. Some are forced out by partnership disputes or divorces. Others legitimately want to pursue other business opportunities. Some business owners spend so much time and effort getting a business off the ground that they are simply burnt out and want to cash in. A buyer should be leery of any business with a historic downtrend in revenues or cash flow. Sometime Sellers want to get out because they foresee a continued decline in their business or because they know of some impending event that will undoubtedly harm their business. Whatever the reason, make sure it is a good one. Secondly, ask the Seller if they know of any reason that business will downtrend in the near future. Find out if there is a major competitor coming to the area or some regulation that is poised to impact the industry. Third, find out who the key employees are, what their roles are and if they would be likely to continue to work under a new owner. Fourth, ask about the immediate competition, who they are, where they are and what percentage of market share they have. Fifth, find out how long the owner is willing to stay on to assist with the transition. There are many questions that a Buyer should pose to the Seller. The most important thing is being prepared with questions.

Tip number 7, Make an Offer. You have located your dream business and now you are ready to make an offer. There are several key things to know before doing so. Do not sign an Asset Purchase Agreement at this point. Buyers want to sign something less committal such as an Offer to Purchase or a Letter of Intent. You want to make sure that you offer has a due diligence contingency, a financing contingency if applicable, a lease transfer contingency if applicable, a liquor license transfer contingency if applicable. You also want to make sure that your offer contains the key terms of the transaction so that the drafting of the Asset Purchase Agreement is more of a formality. Be careful with making an offer that is too low. You do not want to insult the Seller and potentially kill the deal on the spot. Make a reasonable offer and leave yourself some room to negotiate with the Seller.

Tip number 8, Perform thorough Due Diligence: This is a Buyer’s chance to really open up a business to confirm that it is as financially healthy as claimed. Most due diligence is done simply by looking at a Seller’s tax returns and profit and loss statements. The represented revenues are easily discernable by simply looking at the tax returns. Where things get a more challenging is when a buyer tries to vet the represented cash flow. If a business is being marketed at 2 million in revenues with a $500,000 cash flow, buyers want to make sure that the cash flow number is accurate. Most of the time, the purchase price is based on some multiple of cash flow. If you determine that the number is less than being represented you have reason to renegotiate the purchase price or cancel the transaction. Although tax returns and profit and loss statements are good tools to perform an initial due diligence, buyers should go beyond that by checking merchant account histories, internal revenue reports, bank accounts, etc. The typical due diligence period is somewhere between 15 to 30 days. If a Seller is having a hard time getting you the requested information and it seems as if they are dragging their feet, this may be a good indication that there is something wrong with the representations made. This is the Buyer’s time to make sure they are getting what they are paying for.

Tip number 9, The Closing: After completing a thorough due diligence it will be time to move toward the closing. The closing should be a mere formality. All negotiations should be done and all documents should be prepared in advance of the actual closing date. You don’t want to be sitting at the closing table with a negotiating posture. The parties may potentially have to sign a myriad of documents. Those documents may include: an Asset Purchase Agreement, Bill of Sale, Promissory Note, Employment Agreement, Stock Purchase Agreement, a Property Lease, Personal Guarantees, and a whole host of paperwork from the bank financing the transaction. The attorney and bankers should take charge of the closing. Buyers and Sellers usually sign away and collect their checks or keys. This should be an exciting day for both the Seller and the Buyer.

Tip number 10, Now you own it, do not make any drastic changes: The biggest mistake a new Buyer can make is making drastic changes to the business. If the business that you purchased has a strong history of revenues and cash flow then there is no reason to make immediate major changes to the business. You risk alienating customers and your revenue stream. I have seen this happen time and time again with business buyers. Try to make as little of an impact on the face of the business as possible. Of course new owners have their own ideas and want to make changes. If that is the case, make the changes as subtle as possible and over time. It is a totally different situation if the buyer has purchased a distressed business. If that is the case, then the new Buyer has to make drastic changes to turn things around.

For a complimentary consultation:
Contact Cecil Williams (cecil@bizbrokerflorida.com) or call  at 888-925-5055 ext.206.  Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com  Also, visit our Florida Business Exchange website at www.fbxbrokers.com