Business Brokers Operating Throughout Austin, Georgetown, Round Rock, San Antonio, San Marcos, Seguin, and Waco TX
Buying a business can be a complicated process, from finding the right business to working out all the details required for a smooth acquisition. Having an experienced guide can help you avoid the pitfalls that can make it more difficult.
While there is no such thing as the “perfect” business, we know the importance of finding a business that fits your needs, talents, skills and in particular your lifestyle. We will assist you in your selection of particular businesses or sectors to seek a business to purchase then we contact businesses that fit that profile to locate the ones who are willing to discuss selling, then we will guide you through the process and assist you in structuring the acquisition.
It’s A Big Step
Becoming a business owner is a big step, one that can be full of apprehension and even fear. Almost 90 percent of all those who purchase a small or medium sized business have never owned a business. Most of them bought a business that was different than what they were looking for. These buyers had the opportunity to explore the marketplace with an experienced guide and found a business more to their liking. We specialize in targeting businesses with one million or more in annual revenues. Most buyers must seek third party financing coupled with owner financing and a cash investment by the buyer.
We prefer to target businesses with enough cash flow and/or earnings to allow the owner to manage the business but not to have to “run” the business. Lack of adequate cash flow, i.e. earnings available to the owner after all business expenses necessary to operate the business, is the chief reason for business failure.
Some Things To Look For
1. How long the business has been in business.
A business with a long track record generally means there are good reasons to be operating. It will be well known in the area, and people will be used to patronizing the business or using its services. Typically the longer it has been in operation, the better the business.
2. How long the present owner has owned the business.
The longer the present owner has been in business, the more likely he or she has been successful – people don’t stay in business if they are not making money.
3. Why the present owner is selling.
If the owner has been in business for less than a year, is 38 years old, and wants to retire, you should be suspicious. The more valid the reason for sale, the more realistic the seller will be in considering your offer. However, keep in mind that after five or six years or more, people do get restless, “burn-out” sets in, and people look for new challenges. Why the seller is selling is an important question – get the answer.
4. Why books and records are important.
The financial records are a good indication of how well the business has been doing over the years. Keep in mind that tax records are not designed to show the business in the best light; no one likes to pay more taxes than they have to, and business owners are no different. Generally, tax returns are a worst case scenario. You need to be able to look at the expenses and discover which ones are non-cash items, such as depreciation and business use of home and vehicles. How important was that business trip to New York? We can help point these items out to you. It is necessary to recast the financials to obtain a true picture of the cash available.
Keep in mind that financial records are only history. There are no guarantees that they will or can be duplicated or repeated. All of your profits are future. In the final analysis, the financial records of the business are an indicator of what the business has done; what you do with its future is up to you.
5. How to determine if the seller is reporting all income.
The simple answer is – you can’t! Not reporting income is against the law. You should consider only the income that the seller can show you. We all know, of course, especially in cash type businesses, that there is the possibility that the seller is not reporting all of his or her income for tax purposes. This “underground economy” has been well-documented and is in the billions of dollars. Many sellers will tell you about how much they are “skimming,” but you should ignore their statements, since they have no way of proving these amounts. In determining whether a business is the right one for you, you should base the decision on the figures actually supplied to you by the seller.
The Bottom Line
Being a business owner can be a daunting prospect. There are no guarantees. At some point, after all of your investigation is completed, you will still have to make that “leap of faith” that is necessary to proceed with acquiring a business. You will have to work hard, perhaps even “tighten your belt” a little, and perform many different jobs to be successful in your own business. But if running your own show, making your own rules and decisions, not having to worry about job security (remember, no one can fire you from your own business), and just being on your own are important – then owning a business is for you. After taking this leap of faith, almost all business owners will tell you that they would never go back to being an employee.
How We Help
We can ask all the right questions – including the tough questions. We can make suggestions you may not have thought about – either in the selection process or in the area of how you use the money you have available as well as where you find it. We can assist with the due diligence process and guide you around the typical pitfalls associated with buying a business.
As part of that we create a professional, comprehensive packet for each of our businesses for sale. We spend numerous hours up-front in preparation of selling a business and our buyers appreciate the work because they have all the preliminary information needed in order to make an educated decision. Buyers also appreciate the fact that they can take the packet to a bank and it’s all that is typically needed for a pre-qualification letter.
Assisting with the buying and selling of businesses is what we do – and it’s the only thing we do. We have experience and as our return clients know, we’re good at what we do.
Contact us. Commerce Business Advisors charge no up-front fees. We only get paid on success.