1. LIVE YOUR DREAM2. BUILD YOUR WEALTH3. CREATE YOUR LEGACY4. GROW YOUR EMPIRE
Savings Stock i.e.Apple –no matter how many IPADs you buy, you won’t change the stock value Buying homes – Florida is still seeing declines in values and has been for years Commercial Real Estate – Around the Globe, developed land sites un-occupied Businesses
Influence means you can affect the outcome though not everyone does well Plan and prepare well Seek wisdom of trusted advisors Use your vision and wisdom
Presented byLegacy Venture Group Business Intermediaries
Over 50% close up in the first four years according to an SBA.gov report http://www.sba.gov/advo/stats/bh_sbe03.pdf
Realize it can still take years before the franchise matures, if at all, to yield a profit Just because you love the product does not guarantee success Do your research before selecting a franchise Visit sites like: http://www.wikidfranchise.org/
You can tell how well a business is doing up until you purchase it You should be able to improve the business You “can” start making money right away Note: you must still run it right – there is no promise it will continue as is
Have personal control (avoid layoffs, ceilings…) Be your own boss Your efforts and investment help you Excellent potential It can be exciting Satisfaction (workers less happy) Flexibility to meet your needs & desires
Lack of knowledge and / or experience Under Capitalized (Remember Working Capital) Wrong Location Competition (Present & what is to come) Asset investment too high Rent too high Cash Flow Challenges * from SBA.gov – a great site for entrepreneurs
Advantages Disadvantages You can create May need to do a just what you great deal of want research You don’t pay for System and someone else’s location unproven efforts Tough to get Total control financing
Advantages Disadvantages It’s a “proven No success system” guarantee Quick to start up Upfront costs and May have Royalties financing Limited control
Chances of you “discovering the next McDonald’s is very unlikely
But just because it’s a franchise does not mean you will be successful Check out: http://www.bluemaumau.org/6776/25_worst_f ranchises_buy
Advantages Disadvantages Cash flow may The initial start immediately purchasing cost Existing Unseen / hidden customers problems Easier financing Customers may opportunities not stay … (*if, if, if)
Time Period % Sold1 to 3 months 9.7%4 to 6 months 28.3%7 to 9 months 38.0%10 to 12 months 15.9%13 to 18 months 7.6%19+ months .7% 4 to 12 months to sell 82% of businesses 7 to 9 months to sell 38% of businesses
Many hunt for months Some find what they seek in days But 90% of shoppers never buy Financing can take weeks or months
“Understanding the business that is right for you” begins and ends with You!
Personal background Personal interests Risk tolerance Limitations Financial resources Credit report Risk Tollerance
If married, these questions apply to you and to your spouse: How comfortable are you with debt? Do you have a strong belief in yourself? Do you believe it is a business you can handle? The answers relate to how much business you can buy
If married, these issues apply to you and to your spouse: Geographic Cultural Industry type/knowledge Education Lifestyle change People skills
Write out your life priorities and put in writing what you are and are not willing to sacrifice of a businessi.e. Time from family, investment limits, character of the business…
How near to home? Don’t just get stuck How many hours? on an industry at Maximum first but open you investment? mind to any Minimum return on business that meets investment? your needs and Type of tasks? desires!
Put together your financial summary Be aware of ways to finance your business Did you know you can use your IRA/401K for your business without penalty and taxes? Contact us for advisors who can help with this service.
You will want information about the businesses you investigate;be prepared to share about yourself to them.
1. Understand your cash requirements2. Make sure you have appropriate. Working Capital set aside!!!3. Remember there are other expenses such as rent and utility deposits. Request a Buyer Cash Requirement Form from our offices!
Business broker/intermediary Attorney (as opposed to a general practitioner) CPA Commercial lender
Evaluate the business – and yourself – regarding: Absentee ownership Generation of personal income Management style Growth expectations Self-image Physical requirements Continued…
Family involvement People skills Travel requirements Training requirements Demand for extra hours Weekends Day or night work?
People are successful at lots of things Kroc and Schultz were salesmen Mike Lewis – MBA owns plumbing co Sam Champala – PHD runs many gas stations Kris VanOlst – Accountant owns restaurants Cy – Attorney owns Logistics Company Live Your Dream
Review preliminary written information provided by the seller Personally interview the seller to: ▪ Verify preliminary written information ▪ Establish a rapport ▪ Review business facilities and location ▪ Observe business operations during normal work hours (if permitted) ▪ Collect additional data to determine value of business
What business should I buy?Look for owner’s to say you cant get good help the equipment is no good the competition is too fierce the economy
Has good records Has good earnings (or is very well priced) Has bank or owner financing offered
Be wary of “Owner to Prove” Look for numbers from Taxes and Profit/Loss statements Request 4506TCall to discuss more things to watch out for when buying a business!
You will probably have to sign a NonDisclosure Agreement (NDA)or Confidentiality Agreement (CA) of these to get more details on a business.*Read carefully and do not get locked into a buyer fee obligation! Request a sample from our offices!
Make an initial determination of business worth based on: Written information provided by seller Interviews with seller and/or seller’s broker Personal observations of the business Analysis of historical records of the business Additional independent and outside investigations of the business
You should see evidence of earnings but you typically don’t get copies of taxes, leases, contracts and private details until you get to the Due Diligence Phase following an accepted, written contract to purchase the businessInclude in your Contingencies the right to have acceptable evidence of claimed earnings
Research values including what ratios similar businesses have sold for –NOT what For Sales are priced at! A good brokerage can proved two or more resources on what similar businesses sold for!
Or Owner’s Benefit What did the business generate forowner, assuming one (1) full time working owner.
Profit on Income Taxes + Nonrecurring Expenses - Nonrecurring Income + Non-operating Expenses - Non-operating Income + Depreciation + Amortization + Interest Expense + One Owner’s Total Compensation = SDE
Unless buying a discounted distressed business: Must cover debt service Should return 15-20% on down payment investment Should provide a return on time (annual salary) Should meet the lender’s debt ratio requirements
In some cases a “letter of intent” (LOI) might be acceptable (See Letter of Intent) You should submit a formal written “offer to purchase” (earnest money contract) with contingencies to the seller or seller’s broker (See Purchase Offer)
An offer to purchase specifies price, terms, and payment: Cash due at closing Assumption of debt (if any) Bank and/or seller financing: term, etc. Non-compete agreement Consulting income or earn-outs Continued…
The offer to purchase usually has contingencies satisfied prior to closing: Due diligence and confidential information not disclosed by the seller that the buyer still needs to review Lease assignment or negotiation of new lease EPA compliance Licensing requirements Franchise approval Continued…
Other issues that are addressed in the offer to purchase Agreement: Buyer and seller warranties Training Allocation of purchase price Desired closing date Date by which seller must respond
Legal and tax Issues Litigation IRS audits/state sales tax Accounting Accurate picture of financial position Accounting method used (cash vs. accrual) Inventory valuation State regulations Environmental
Purchase/sales agreement Promissory note Security agreements Bill of sale UCC filings Board of directors resolution (authorization to sell) Real estate documentation (if appropriate) Lease agreements Other side agreements Closing statements (prepared by attorney and/or title company)
Pre-acquisition steps: Create buyer’s corporate entity and/or register fictitious name Federal ID number Corporate bank account(s) Obtain appropriate licenses (occupational, state sales tax, local, etc.) Obtain insurance
NEVER CLOSE WITHOUT A CLOSING ATTORNEY Execute (sign) the pre-approved closing documents Transfer proceeds of the sale to the seller Transfer ownership of the Business to the buyer
Sellers will usually train you for 2 weeks to 6 months Anything beyond 2 weeks is generally part of a consulting arrangement
SEARCH QUALIFYING BROKER DEAL MAKING CLOSING PROCESS DATABASE Explain Buying Process Business Interest Buyer/Seller First Meeting Coordinate Due DiligenceFinancial/Credit worthiness Qualify Buyer for Tour Business Loan Request Package A specific Business Business Review 1-Page Business Probe Buyer’s continued Lender Introductions Experience Summary Interest Licensing Determine Buyer Interest Motivate Buyer to Act – Assist in Resolving All Offer to Purchase Issues Life style changes Nondisclosure Agreement Facilitate Negotiations Formal Contract Geographic Review CBR LOI or offer to purchase Review Final Documents Location /Data Package Close!
Hire professionals who deal with buying and selling businesses on a full-time basis Do your homework Know what you are willing to pay Prepare yourself for the purchase Enjoy the process and …
Legacy Venture Group Business IntermediariesCall for more information on subjects covered in thisbusiness buying overviewRequest listing updates or to get our e-newsletter.Info@BuyBizUSA.com813.571.7700
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