Small Business Transaction Market Place Continues to Improve

After showing a slight improvement in 2012 versus 2011 in small business transactions, the 1st quarter of 2013 has started with a bang!

According to BizBuySell, the internet’s largest business for sale marketplace, small business transactions increased by 56% over the 1st quarter of 2012.    The number of transactions reported represents the highest number of businesses sold in a quarter since the 2nd quarter of 2008!

Financials Strengthen
Sales price on transactions, as well as revenue and profits reported in those transactions, all increased significantly in Q1 2013. Sales prices increased by over 20% in year over year comparison.

Dallas / Fort Worth area shines!
In reviewing the total number of business transactions during 2012, the Dallas – Fort Worth metropolitan area reported the sixth largest number of transactions in the country during that period.

There are many factors to consider when determining the right time to sell a business.  Clearly, the economy is one factor, and in particular, the market place for business transactions.  The last few years have been a very difficult time to maximize the sales price for a business, but we are now seeing the pendulum swing back in the right direction.  2012 marked the third year in a row for improvement in the market place, and Q1 2013 report is further validation of the continued improvement.  However, that doesn’t mean that it is the right time for every business.  Let us help you assess your business, and help you determine if you are positioned properly to maximize the sales price for your business!


Examining All the Factors

Knowing When to a Buy a Business

examiningHas the time come where instead of you working for a business, you want to own one? To decide if buying a business is the right decision for you, speak to a VR business intermediary that can help you answer all the pertinent questions.

With any business opportunity, there is a degree of risk and challenge involved. Ask yourself if your personality is conducive to one that thrives in an environment where you have to wear many hats. Throughout the buying process, you have to understand what is at stake for you, both financially and personally. If you’re ready, the rewards will surpass whatever gamble is involved.

What’s Your Motivation for Buying a Business?

If you’re seeking job security or are dissatisfied with your present job, then determine if the business opportunity you’re considering satisfies what you are looking for professionally and personally.

Do You Have Support from Your Family and Friends?

It’s important for you to find out if your family and friends will support you on this new and exciting endeavor or if you’ll be left out in the cold.

They may not understand your prime motivation and personal goals that may be prompting you to buy a business, especially when you’re leaving the security of your current employment. This is one of the biggest decisions you will make in your life, and they have to understand what your feelings and motivations are in doing this. Without your spouse supporting you, the transition can be very difficult. If you take the time to explain the why’s in this decision, they may warm up to it.

Financial Backing and Advice

Knowing your financial options is imperative when you’re going to be investing in a business. You have to know where you’re going to be drawing your capital from.
Do you have financial advisors that you trust and have a working relationship with? Consider carefully what their opinions might be. You don’t need to look at the books of even a single business to know what your attorney’s opinion will be. You can find out right now by asking, “I’m thinking of buying a business — what do you think?”

What Can You Invest?

You may have $50,000 or $100,000 in liquid cash; however, that doesn’t mean you will feel comfortable spending it. Analyze your risk threshold and consider how much of that cash you are willing to invest. If you run short of cash, would you be willing to put up your home as additional collateral? It’s critical that you understand exactly where you stand on the risk factor curve.

How Long Do You Want the Business?

At this point, you should spend time considering exactly what you want to do with the rest of your life. Do you want to run this particular business forever? Just because you’ve purchased your own business does not mean you’re locked into it for the rest of your life.

Many buyers will purchase a business they can afford in a different industry than they’d planned on, run it for two or three years before selling it after they’ve built-up some equity. This is one way, for you to then buy a business in the industry that you want.

  • Take time to analyze the business/industry trends.
  • Pay close attention to whether gross sales are up or down and whether cash flow has been increasing or decreasing.
  • Carefully review the expenses required to operate the business, such as: leases, rents, utilities, labor, inventory, plus other necessary costs.
  • Don’t be discouraged if a business is doing poorly. There might be other factors other than the industry or market affecting it, such as poor management.

Discover the Reasons the Business You Want is Selling

Knowing why an owner is selling the business that you want to buy is important.

Is it due to:

  • Burn-out;
  • Poor health;
  • Retirement;
  • Relocation Plans;
  • Need to upgrade;
  • Not generating enough revenue;
  • Poor management;
  • Lack of capital;
  • A partnership dispute; or
  • Has the business outgrown the owner’s abilities?

What Does Your Gut Tell You?

If you like the industry, the customers, the feel of the business and are comfortable with the idea of being there every day, you are on the right track.

Compare Yourself to the Present Owner of the Business

Is the current owner an easygoing type, a high-octane dynamo or someone just like you? Also, consider whether or not the business is run in a way that you would like to do business and how changing those operations you don’t like would affect the business.

Ask yourself if you would be as good a business operator — or better — than the current owner. Few people buy a business expecting to do things exactly the way the present owner is doing them. Most people envision additional opportunities for a business, perhaps planning to increase advertising or expand the product line.

If you’re thinking about buying a business, carefully think through each of these issues. Answer them honestly and your future path will become clearer. But keep in mind that while it can take great effort, unlike a job, the potential is unlimited.


Walking the Road to the Dream

What Buyers Want to Know When Looking at Purchasing a Business

dreamPeople want to be their own boss. By far, this is the biggest reason people want to go into business ownership. Some may be frustrated in their current job or position. Others may not enjoy their current boss or employer, while others feel that their abilities are not being used properly or efficiently.

Surprisingly, money is not the first reason; not because it isn’t important, but it may not be the primary issue. Once a person decides to go into business for him or herself, he or she has to explore the options. Starting a business is one option, but there is a lot of risk for failure. Most people choose to buy an existing business because the risk is not nearly as high – established brand and customer base, existing inventory, place of operations, etc.

There are some key questions a buyer wants, or should want, answers to, once the decision to purchase an existing business has been made. Below are some main questions that the seller should be prepared to respond to each one.

How Much is the Down Payment?

Most buyers are limited in the amount of cash they have for a down payment on a business. After all, if cash were not an issue, they would buy the business outright.

Will the Seller Finance the Sale of the Business?

It can be difficult to finance the sale of a business. If the seller isn’t willing, he or she must be willing to find a buyer who is prepared to pay all cash. In many situations, this is very difficult for the buyer to pull off.

Why is the Seller Selling?

This is a very important question. Buyers want assurance the reason is legitimate and not because of the business itself.

Will the Owner Stay and Train the New Owner?

Many people buy a franchise or an existing business because of the assistance offered. A seller who is willing, at no cost, to stay and to help with the transition is a big plus.

How Much Income Can a New Owner Expect?

A new owner has to be able to pay the bills – personally and professionally. Just as important as the income is the seller’s ability to substantiate it with financial statements and tax returns.

What Makes the Business Different, Unique or Special?

Most buyers want to take pride in the business they purchase.

How Can the Business Grow?

New owners are full of enthusiasm and want to increase the business. Some buyers are willing to buy a business that is currently only marginal if they feel there is a real opportunity for growth.

What Doesn’t the Buyer Know?

Buyers and sellers don’t like surprises. They want to know the good and the bad from the beginning. Serious buyers understand there is no such thing as a perfect business.

THE BIG FOUR AND THE REST

Years ago, it could be said prospective buyers of businesses had only four questions:

  1. Where is the business?
  2. How much is it?
  3. How much can I make?
  4. Why is it for sale?

Additionally, today’s buyer wants to know much more before investing in a business. Sellers have to be able to answer not only the big four questions, but also be able to address the wide range of questions outlined above.

What most buyers really want is an opportunity to achieve the dream of owning their own business.