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Buying an existing/established business?
01-16-2018, 09:56 PM
Hi all,
I was wondering if anyone here has experienced buying an established business or has any options on it?
E.g. Bizbuysell.com has 1000s of business for sale across the country. Typically you will pay at least 2.5x upwards of the yearly profit.
I've been in contact with regards a few but the fear is always... is there a reason the owner is selling that you are not aware of, e.g. New compution, regulation, reduced demand.
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Buying an existing/established business?
01-16-2018, 10:43 PM
The only way to know is to get complete access to the financial records.
Ask for everything. The owner should be willing to give it to you without hesitation. Any resistance and you should walk away.
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Buying an existing/established business?
01-17-2018, 01:06 AM
Harvard Business Review Guide To Buying A Small Business
Entrepreneurship through acquisition of small, enduringly profitable businesses with slow growth of repeat customers. From motivated sellers.
Fascinating insights — google and buy.
(Too lazy to link on mobile - let’s leave it as an exercise for the motivated reader!)
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Buying an existing/established business?
01-17-2018, 01:09 AM
To your fear, it is true that selling a profitable biz is a worse deal than hiring a manager and becoming a passive owner. So a buyer should be wary of a young(ish) owner prepared to walk away — what does he know that we don’t?
Retiring owners can be a great source: they are motivated to sell for reasons that likely are not shady.
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Buying an existing/established business?
01-21-2018, 12:52 PM
Thanks for the comments all.
I’m now on chapter 3 of the HBR book.
Superb recommendation!
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Buying an existing/established business?
01-21-2018, 03:41 PM
Its very hard to get a true picture of the internal state of a business. Books and accounts can be fudged and manipulated so easily.
Why sell? If it's such a good business, why is it up for sale?
It's much better to start your own business from scratch I think.
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Buying an existing/established business?
01-22-2018, 01:28 PM
Businesses are not very liquid so sellers will often finance.
A good M&A lawyer will draft an agreement where you don't have to put much of your own money in, and you use the profits of the busienss to pay the seller back. The agreement will have various (representations) promises about the status of the business which if untrue should excuse some or all of your obligation to repay the seller (give rise to an indemnificaiton claim).
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Buying an existing/established business?
01-22-2018, 01:58 PM
Extremely valuable info. Thank you!