“What type of business is the best one to buy?” This is a great question, and it’s one we get asked quite often a Vested Business Brokers. In this video, Vested’s owner and CEO, Nathan Goldstein reveals his process for deciding what kind of business to buy…
First of all you should always make sure the business you’re looking to buy is a PROFITABLE one. Next, you might want to consider buying a business that fits your personality, especially if you’re planning on using your specific skill-set in order to grow the business.
The “SWOT” Analysis
Before buying a business for sale you should always do what’s called a SWOT Analysis, which stands for:
By understanding and analyzing a potential business to this degree you will be in a better position to make the right decision when buying a business for sale.
At Vested Business Brokers we help business buyers do their SWOT Analysis. If you’re looking to buy a business give us a call at (877) 735-5224 today to speak with one of our experienced business brokers.
So, you want to buy a business valued at around $1,000,000 but you only have about half that. How do you get the deal done? The answer is with seller financing. But why would a seller in effect lend you money to buy his or her business? This question is answered by Vested Business Brokers owner and CEO, Nathan Goldstein in the video below…
Buying a business with seller financing is not uncommon when referring to the sale of “small” business (those valued at around $1,000,000 or less).
Folks, listen to what I’m saying. The owner of the business, who doesn’t know you, but you have the down payment to buy his business, is going to lend you the money so you can complete the transaction. This is a great thing, because he also wants to get paid, right? It’s like having a build-in consultant in your deal. If you get jammed up, you don’t understand the vendor, you can’t collect with a client, you can always pick up the phone. He has a vested interest, and that’s not a pun, in helping you be successful.
Many times, you’ve seen on my videos that we have a buyer who bought a business and he talked so highly of this seller who helped him grow his business. It’s a great thing. If the representations of the seller are not right, you can always adjust the price. We’re in a fluid market, which means it’s what the buyer wants to pay for that underlying opportunity, and it’s an open market.
Don’t hesitate to throw bids out there that are a little bit below the upper market to get the deals done. You never know the situation of the seller. He might have already checked out, he might have bought the house in Florida, he wants to go play golf but he’s stuck going to work every single day, and you, you’re stuck at home and you want to get out there and go to work. This guy has location, a staff, a great lease, a great company. He just doesn’t want to be there anymore. That’s the perfect business.
We’re going to help you find that business. Our guys and gals are on the street every single day handing out thousands of pieces of literature to tell people we have the clients that are looking for that business, and we do. If you want to be one of those clients, don’t hesitate to call us today. We’re here to help you. Call us at (877) 735-5224 to speak with one of our experienced business brokers.
When buying a business you should always sign a letter of intent. So, what is a letter of intent…or LOI, for short? A letter of intent is a written offer which underscores your interest in a particular business. The benefits of having a letter of intent are explained in this video…
A letter of intent typicaly includes what is called a No Shop Clause which prevents the seller from “shopping” the business for a two week period while you, the buyer, are doing your due diligence.
So, the letter of intent provides you with the security that you can conduct your due diligence thoroughly and that the business will not be sold out from under your nose during that period of time.
A letter of intent also acts as a guideline that both the seller and the buyer use to structure the deal. Letters of intent are really great because you hand them off to your lawyers and the lawyers know exactly what the deal is. There is no guess work.
Years ago buyers and sellers didn’t have a formal process in the letter of intent process. We would send the seller off to his lawyer and we’d send the buyer off to his lawyer and when they both came back with the deal, it was completely different in terms and price than what they had all agreed on.
Therefore, the letter of intent acts like the “pre contract” of what everybody agrees on what the deal should be. Then everybody has time to take a deep breath, do their due diligence, look under the covers, figure out what the business is, and make sure that the seller can prove all his representations to you. But he can’t sell the business out from underneath you to somebody else because he has a No Shop Clause in the letter of intent.
Typically we take a five thousand dollar good faith deposit, Vested will hold that deposit for you and if, for any reason, you are uncomfortable with that particular deal you will get refunded that money.
Do you have any questions about letter of intent or how to buy a business? If you do then call Vested Business Brokers today at (877) 735-5224 to get all your questions answered by an experienced business broker.
When you’re looking to buy a business, what are the key components that are the most important factors from the buyer’s perspective? The answers are revealed in this video…
Profit is the number one. You want to buy a profitable, privately-held business. You want to make sure that the seller can prove his numbers to you, and that you have the sense that they have historical financial information that you can dig into with your experts to make sure that you’re buying a profitable business.
Location, Location, Location…
Second-most important aspect of the deal is the lease. Location, location, location! I remember my dad telling me years ago, “You want to create wealth in real estate, you have to buy location.” Folks, location in businesses is 99.9% of the time the most important factor because it’s where the traffic is driven.
You’ll know right away if you have a good location because the revenue and the profits of that location run hand in hand. When you get that, you want to make sure that you have a long enough lease to amortize the debt and make yourself very happy with the rate of return on your investment.
Folks, I wish you a lot of luck. Stay out there, look for it. It’s a hunting game. You have to find the right one. Take the time to find the right business. This is what you’re going to be doing for your living. You don’t want to rush into it. You don’t want to buy the wrong business. You always want to buy the right one.
Remember, always hire professionals that you can work with, that you like, that you understand, and work with them to make sure that you’re doing the right transaction.
Let us know if we can help you find the business of your dreams. We have approximately 4,000 opportunities that we currently represent. We’d love to hear from you. Give us a call today at (877) 735-5224 to speak to one of our experienced business brokers.
We recently received a great question asked by someone interested in buying a business. The question is, “what is the due diligence period?”
Hi, my name is Nathan Goldstein and I am the CEO of Vested Business Brokers, we help people buy and sell profitable, privately held businesses for sale since 2001. In that period of time with helped close more than 1000 transactions.
Folks, the due diligence period is the most serious part of a deal. It is probably the scariest part for either buyer or seller because during this time the seller is disclosing to the potential buyer all the financial information relating to his business. And, it’s the buyer’s job to make sure that whatever representations the seller is making are 100% truthful, correct and accurate.
So, as you can imagine, this is a crucial time period for the parties to a transaction…and it is the time when you, as the buyer, have to be the most serious entrepreneur about your deal. You really need to dot the i’s and cross the t’s…as it were.
This is very important…You SHOULD have competent professionals help you during the due diligence period. At Vested, we strongly recommend that you get a CPA with forensic accounting experience or somebody who understands small business. You need to get him in there and make sure that the seller’s financial representations are accurate.
If for any reason you are not comfortable with the seller’s numbers during due diligence you have two options.
You could walk away from the deal, or
If you really like the deal and you think you could improve the business you could ask the seller for an adjustment in the price because you try to price it and you priced your deal based on his representations.
If his representations cannot be proven, let’s say for instance, a seller says he is making 200k and, after your due diligence you find he’s only making 150k, that extra 50 thousand dollars can dramatically effect the price of the business.
As a business buyer you have to be very thorough when you are doing your due diligence. You can’t just agree and say, “I am going to spend 300 hundred thousand dollars on a business that is really only worth 200 because instead of the guy saying that he is making 150 he is only making 100.”
In the context of doing your due diligence you need to be aware of the multiple or market value of the type of business you’re looking at…making sure that you can prove all the numbers that the seller’s representations are accurate.
Be patient, deals are not easy but they are worth the time and effort.
If you need help you can call us at (877) 735-5224.