Many experts are predicting that a huge wave of Florida businesses will become available over the next decade or so as baby boomers look to sell. As the economy continues its climb into a full-blown recovery (we hope), it just might be the perfect time for you to fulfill that lifelong dream of buying a business. Before you take the plunge, however, you should take the time to ask yourself a series of questions that will help make sure you’re prepared for the rigors of business ownership.
Certainly the team of advisers you assemble to make such a deal—such as business brokers, attorneys, and accountants—can help you in determining the value of a business and what you should pay for it. But there are additional questions you need to ask yourself, and the seller, to find out if the business you’ve targeted is everything it’s cracked up to be. With that, here is a list of 10 questions (in no particular order) that you should get answers to before buying the Florida business of your dreams.
1. Is buying a business the best decision for you right now?
2. Will your spouse support you?
3. Who runs the business when the owners go on vacation?
4. Do the numbers add up?
5. Are there any other skeletons to worry about?
6. What do the customers have to say?
7. How does the business make its phone ring?
8. Why is the seller really getting out?
9. Will the seller keep some skin in the game?
10. What is your exit strategy?
Not so easy questions – there are many factors to consider. Let us at FLORIDA Business Opportunities, Inc. help you find that dream business and become your own BOSS. View 1000’s of current listings available now at: www.FLORIDABusinessOpportunities.com
In a perfect world, the best time to sell a business is when the business is performing well with future projections looking even better, the national economy is strong. However, regardless of the state of the economy or the industry, there are certain things owners can do to make their business sellable and as attractive as possible to potential purchasers.
To build market value, address the following items:
- Standardize and document all company procedures
- Eliminate liabilities or liens and resolve any outstanding litigation
- Investigate transferability of leases and sales & supplier contracts
- Perform maintenance on company equipment to ensure good operating condition
- Secure key employees with employment contracts
- Eliminate non-performing or non-contributing employees from the payroll
- Establish a management team that can operate without the current owner
- Reduce reliance on one or two large customers for the majority of sales
- Spruce up the physical aspects of the business facility
- Have clean, verifiable financial statements for the past three years
And to improve cash flow, take the following action:
- Reduce unnecessary inventory
- Collect any outstanding receivables
- Re-negotiate favorable key supply contracts
- Reduce personal adjustments on Income Statements
- Ensure financial controls are established
Owners should be aware that there is an inherent conflict that arises with running a business and preparing it for sale. Many businesses are run with the objective to minimize tax liabilities. Unfortunately, the same techniques and accounting practices that minimize taxes also minimize the value of a business. Ideally, plans to sell a business should be made three to five years in advance of the anticipated sale. This will allow adequate time to make changes and demonstrate a track record of maximum profits.
In addition to setting a future target date to sell their business, a business owner should ask themselves what they want to get out of the sale of their business. Do they just want to finance their retirement? Is it important that their son or daughter remains with the business? Can they gain tax benefits by financing part of the sales price? Do they want to ensure the new owner will treat their customers with the same level of service? Make a list of priorities and seek the advice of business professionals to ensure there are no surprises during the process of selling a business.
Once a decision has been made to sell a business, the owner should be conscious of the need for confidentiality. Any leaks about the sale of a business can cause panic and fear for the employees, suppliers, landlords and banks. Great care must also be taken to assure that competitors and customers do not learn of the planned business sale. Competitors may sabotage a business by leaking the information to employees and customers. Key employees may start looking for other employment. Customers could be concerned about how the business will perform under new management and may seek alternative sources for the product or service. If any one of these were to happen, the value of a business could be significantly decreased. Working with an experienced Merger and Acquisition Advisor or Business Intermediary can minimize the risk. The name of the business and any detailed information should be disclosed only after it is determined that a potential buyer has the skills, experiences, financial capability and leadership required to run the business being considered. In addition, all potential buyers should be required to sign non-disclosure agreements stating they will maintain confidentiality on all of the disclosed information.
To view our current business listings in Florida, visit: www.FloridaBusinessOpportunities.com
Over thirty years ago the ERISA Act created IRAs and 401(k) plans to allow investors to control their retirement savings, in contrast to traditional pension plans.
Besides investing in stocks, bonds and mutual funds, tax payers can also use these savings – which are excluded from taxes – toward financing their own business.
Using retirement funds to start up or purchase a business has become more popular since 2001, when the dot-com bubble burst and made stocks less attractive and sent hundreds of downsized executives out looking for something else to do.
Today, more and more taxpayers are cashing in their retirement accounts and placing these funds into a very specific type of trust that provides the beneficiary with the ability to use this money to make an equity contribution in a business in exchange for the trust holding a relatively high percentage of ownership in that business.
These people feel that they can get a greater return on their life savings by investing in their own business and adding in some sweat equity, and end up with a larger nest egg upon retirement.
These trusts are being organized so they can comply with the rules of the Employee Retirement Income Security Act (ERISA) and be classified as a Qualified Trust so they can receive certain benefits under the rules of the Internal Revenue Service.
One of these benefits is that the individual who withdraws his or her retirement money from a recognized tax-exempt retirement plan, like a 401(k), will not be subject to any IRS penalties for early withdrawals.
Another benefit is the opportunity to start a business debt-free by not having to borrowing start up capital and having the burden of note and interest payments. When startup companies are financed with equity from outside sources it can be the most expensive avenue of financing because the company is worth so little.
Let a Business Broker help you. Would you like to buy a business? View our 3000+ Florida business listings at: www.FLORIDABusinessOpportunities.com
For most companies, there are several categories of prospective buyers. The most obvious are other companies in the same business for whom the acquisition would be a logical expansion with potential economies of scale. Consideration should also be given to suppliers and customers of the business.
However, based on our experience in selling hundreds of businesses, approximately 80% of the prospective buyers are individuals who want to control their own future. Most of them will be moving into the area from other states and countries.
FLORIDA Business Opportunities, Inc is in continuous contact with all categories of buyers. We utilize effective search procedures to find and screen those who are best qualified to buy. For a confidential valuation of how much your business may be worth today, call 941-366-1500.
If you would like to compare your business to other similar ones for sale in Florida, just visit our website at:www.FLORIDABusinessOpportunities.com
Your Six Steps To Success To Buy A Florida Business:
- Commit to a deadline for buying a business (not just “looking” for one).
- Set aside time everyday to work on this project.
- Organize your finances.
- Work on determining what type of business will thrive from your strengths and not suffer from your weaknesses.
- Seek professional advice from a qualified business broker whom can help you in this process.
- Unless you have a wealth of experience buying businesses, then educate yourself about this process. Learn as much as you can. When it comes to investing in your future, you can never know too much!
Determine Your Investment Level
Determine with absolute certainty how much of your own cash you are prepared to invest. Forget any relatives who may have promised that they’ll “back you.” When the time comes to lay down the money, chances are they won’t be around.
Don’t bother looking at businesses that are unaffordable. Over 90% of small business purchases involve seller financing. Generally, this is 20% – 40% of the purchase price. If you have $100,000 to invest, don’t look at businesses that will sell for $500,000. It’s OK to dream, but be realistic.
Also, take the time to sit down with an SBA specialist abd a business broker to research all avenues for your financing if you have good credit. FLORIDA Business Opportunities is ready to help you now. View our thousands of listing today at www.FLORIDABusinessOpportunities.com
You should also know that valuation is an art, not a science. The key to establishing a valuation benchmark is to utilize a variety of formulas. We are not a fan of the “Rule of Thumb” method, since we do not believe that any two businesses are exactly the same. Valuation must be done based upon what you, as the buyer, can reasonably expect to generate in your pocket, so long as the business’ future is representative of the past historical financial data.
Having said this, the most viable valuation method for small businesses, is the multiple method. This formula applies a factor to the previous year(s) Owner Benefit figure to arrive at a purchase price. The Owner Benefit figure is a combination of several factors:
Pre Tax Profit + Owner’s Salary + Additional Owner Perks + Interest + Depreciation
Typically, small businesses will sell in a one to three times multiple of this figure. Now, this is a wide range so how do you determine what to apply? The best mechanism we have found is that a one times multiple is for those businesses where the seller is “the business”. In other words: as out the door goes the seller, so too can go the customers. Consulting businesses, professional practices, and one-man businesses come to mind.
Two to four times multiples are for businesses that have been around for several years, have shown sustainable growth, have a solid base of clients, assets that will not have to be replaced in the immediate future, are involved in growth industries, etc. Of course, there is a lot more to factor into the equation and you must always keep in mind that value is a personal assessment.
One thing that you should do is to ask the broker to provide you with the rationale for how they established the asking price. A good business broker will educate the seller regarding the market, and overall valuations and will price the business to generate the greatest amount of interest possible.
Always keep in mind the inexact nature of valuations. Use a variety of methods. Understand how the price was determined, remember that valuation is a personal formula, consider the potential return on your cash investment, never, ever buy a business just because the price is right – first and foremost be certain that the business itself is right for you!
See thousands of listings in Florida on our website at: www.FloridaBusinessOpportunities.com
The decision to sell a business with a Florida Business Broker is a very personal one, often relating to quality-of-life issues for the owner and his family. That being said, it is an extraordinarily good time to sell a business. The economy is strong. Interest rates are still low. The lending climate is favorable. And, of course, capital gains tax rates (which most business sellers can take advantage of) are at 20 percent.
Selling a business is the end of one journey and often the beginning of a new adventure. The business being sold often represents the bulk of the seller’s estate and the monetary value of the seller’s life’s work. The sale shouldn’t be rushed, but should be handled in a deliberate manner with proper professional help. The business should be prepared and packaged in a manner calculated to achieve the highest attainable price. The selling process should be managed in a way that maintains confidentiality and doesn’t interfere with day-to-day operations of the business. The transition to new ownership should be structured in a manner that ensures the continued health and viability of the business for both the employees and the new owners.
When handled correctly, the sale of a business can give the seller the money needed to start the next phase of his life, whether it leads to retirement, more time with family, the pursuit of other interests, or a new business venture. Although, at the closing, many sellers have mixed emotions about giving up their cherished “baby,” after the sale most sellers are soon exhilarated by their new-found freedom and prospects for life’s next adventure.
Learn how we can help you sell your business or view our may opportunities of businesses for sale at:www.FLORIDABusinessOpportunities.com