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3 Reasons To Buy An Established Business and How To Get Started

Advantages of Buying an Established Business

If you are trying to decide between starting your own or buying an existing business this blog is a must-read. Below are a few of the many reasons buying an existing business may be the better decision, along with a couple of tips that potential buyers should keep in mind before making a purchase.

 

Skip the Startup work

Skip the startup work: Developing a marketable idea and getting it off the ground is the hardest part of starting a new business. Before selling goods or services, startup entrepreneurs need to spend a great deal of time and money on equipment, paperwork, permits, process and procedures. After setting up the basics, they often work 60-80 hours, seven days a week in the first year or two. As a matter of fact, these business owners may not see a profit in the first few years of business. Starting a business is risky. From IBBA's blog, "according to Michael Gerber, author of The E-Myth Revisited, 40 percent of new businesses fail in the first year, and 80 percent fail within five years".

 

Save Time and Resources

When acquiring an existing business, buyers avoid the startup costs and activities associated with starting a business from ground zero, and can instead get right to work improving and growing the business. Buying an existing business means obtaining a knowledgeable staff, saving time and money to find and train new employees. When acquiring a successful business, buyers are paying for a proven concept and an existing customer base, avoiding the need to generate initial interest in the business. This translates to a significantly lower risk. Rather than relying on speculation, projection, and estimates, buyers can make informed decisions based on the business's sales and profits. Even if a business' records are lacking in some areas, buyers will ideally know whether or not they can improve the business with their unique skills, experience, and ideas.

 

Better Financing Options

Easier to finance: While buying an existing business can sometimes appear costlier than starting a new one, buyers are actually more likely to receive better loan terms from lending institutions when buying an existing business. This is because banks are able to see the historical earnings of an established business, and are more likely to help fund the transaction. When buying an existing business, buyers can use the cash flow of the business to pay down acquisition costs while also receiving a salary. The money saved by buying an established business can then be used to grow it.

 

Tips for Buying an Established Business

 

Know Your Strengths

Find the right fit: Since buyers are taking on someone else's established concept rather than implementing their own new idea, it's important for them to locate an existing business that is the right match for their strengths. Buyers can begin by considering their own talent, interests, and experience, along with the time they are willing to put into a business. In addition to these key considerations, buyers will need to find a business located close enough to manage it.

 

Do Your Research

Don't inherit existing liabilities: Business owners decide to sell their businesses for a number of reasons; for example, many sellers have simply reached personal goals, are ready to retire or need to relocate. While Business Advisors do the initial work of gathering financials and determining an opinion of value based on industry research and comparison of similar transactions, buyers still need to perform due diligence in order to understand exactly what they are taking on. During the due diligence, buyers will need to ask questions and obtain documents from the seller to verify the business's profitability and ability to continue being profitable by looking at client contracts, expenses, employee non-competes and having an understanding of cash flow throughout the year. Creating a business plan, proforma, and working with an established Business Advisor will help buyers make better decisions. A great resource is Walter Deibel's book, Buy Then Build.

 

Gather a team of experts to help you

Before starting a search, buyers should considering taking the time to find and develop relationships with experts. This would include a business broker, banker, financial advisor, accountant, and attorney, who can help buyers find the right business, secure financing, help with due diligence and review or structure the offer. If you are interested in buying an existing business, start the process by contacting Transworld Business Advisors of Minnesota to schedule a meeting with one of our expert Advisors.

Lauren Altschuler
Lauren Altschuler
I assist buyers and sellers of privately held businesses in the buying and selling process. We help value your business for the best price, advertise it confidentially to qualified buyers, handle buyer interviews, discussions, negotiations and facilitate the due diligence investigation and the sale of the business.

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Is Buying A Business A Good Idea?

Yes!  Buying a business is a good idea.  Why?

Ten Steps To Selling Your Busines

Our Sellers except us to achieve the highest and best offer for their business while taking the least amount of their time away from it as possible. That is because the absolute best use of their time is to continue to run and grow the company.  If revenue or profits begin to decline, buyers will walk away or decrease their offer. Transworld's philosophy can be summed up in a ten step, how-to strategy that culminates with the sale of a company. This proven method has been used to sell hundreds of businesses.  Here are the steps. Step1 Comprehensive Business Analysis and Feedback As your business broker, the first thing in our how-to strategy is to analyze your operation, finances, market potential and industry trends. We take that information and advise you on steps to prepare your business for sale, and  generate a business profile that represents your company in the most attractive way possible. Step2 Sale Structure We identify the best possible price range to sell your company. This is based on solid facts, the condition of the market, projected growth, sales potential and the sale of similar businesses within your industry. Transworld’s experts apply sophisticated, time-proven valuation techniques to ensure that your price is appropriate for the current market condition. The price must not be too high or too low. Yet, it must represent an attractive investment potential for the buyer. Step3 Confidentially Network The Business For Sale During the selling process, we utilize the latest technology to present your company to other business brokers and strategic buyers all over the world. This greatly multiplies the effort in your favor. With Transworld Business Advisors, you have literally thousands of industry professionals confidentially representing your company to buyers.   Step4 Confidentially Advertise To Buyers Our aggressive marketing program ensures your confidentiality and provides maximum exposure for your company. Your listing is placed in various industry databases, Internet sites, and publications which are constantly updated. We spend more money in advertising and marketing for buyers than anyone else in our industry. Step5 Control The Information Flow We organize all necessary documentation and release information only as needed. We use limited information when advertising to maintain confidentiality. Buyers are pre-qualified and required to execute a confidentiality agreement before receiving any sensitive business information. Step6 Create Competition For Your Company We attract thousands of buyers, creating competition for your business. Buyers are qualified for financial ability to meet the offer, and we engage you with only the most qualified buyers. Once you meet the best of the buyers, we urge them to prepare and present all offers. We can continue to engage potential buyers on your behalf as negotiation on an offer is in process and have another interested party ready to go should a buyer change their mind. Step7 We Negotiate For You To Achieve The Best Price Appropriate negotiation is crucial to achieving your best price and terms. We have the expertise to establish sound and resourceful negotiating techniques on your behalf. Transworld has trained all of its agents in the art of negotiating through curriculum that we have created specifically for our industry. Never negotiate without planning, expertise, or from a position of weakness. Step8 We Provide Exceptional Support To You Through The Due Diligence Process We take pride in our exceptional service. Only half of the job is finding the right buyer who will pay your price and meet your terms. The other half is getting that buyer to the closing table. We quarterback the deal, work with the accountants, lawyers, banks, landlords, and other third parties that could jeopardize the success of the transaction. We realize that you depend on us to guide you through the sale of your business. We make the transition simple and easy for you. We know when an opportunity for you may arise and are always there to take advantage of it. We also know when someone is trying to kill your deal or is being unreasonable and how to handle those situations. Step9 We Are There From Beginning To The Closing We help manage all administrative procedures, licenses, inventory counts and lease assignments that may be required. Transworld works closely with your advisors to ensure a smooth transition. Using the latest technology, we strive to be ready to work on your behalf to get the deal done! Step10 We Are There For The Transitional Phase And Beyond! Because we are in the business community, you may want to consult us from time to time after the sale. We will provide you with the assistance after closing. Transworld will always remain in your corner! Schedule Consultation Now

5 Tips For Keeping Your Business Sale Confidential

When selling your company, it is crucial for the health of the business and its future that the sale remain confidential. If your customers, vendors or employees learn it is for sale, it could have a negative impact on value.  Learning of a business sale may encourage customers to replace your product or service, employees to look for more secure employment, and vendors to demand payment of invoices.   If the value of your business is impacted, you will lose negotiating power with buyers and will not get the highest and best offer for it.  One way to protect the confidentiality during the sales process is to work with a business advisor, who will work on your behalf, use best practices, and allow you to continue to run your business.  Here are some tips we share with sellers on  keeping a sale confidential.

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