Tools make buying a Business Easier
Buying a business is easier than ever thanks to a spate of new tools that can help you through every step, of buying a business. With the right tools, it is easier to find motivated sellers, organize your approach including the team you use to help you and present a fair offer.
Here are four tools, none of which were commonly available a decade ago, that are changing the business buying process.
1. Leveraging your network
There are typically more buyers than sellers, making the market extremely competitive, according to Forbes. For that reason, you need to aggressively search as much as possible. To widen your pool, it is critical to look for businesses that aren’t yet listed for sale.
Comprehensive sales databases should be an important part of your search strategy, but don’t just restrict your search to public sales forums. Use your own networks; Facebook, LinkedIn, Twitter, personal contacts, and professional organizations; to see what is available under the radar. Having a personal connection to the seller through a friend of a friend can make it easier to buy a business.
As you work through the buying process, keep in mind many owners view their businesses as more than just investments. Many small businesses are the culmination of the owner’s blood, sweat and tears. Because of this deep personal connection, many owners are more likely to sell if they know the prospective buyer is a friend of a friend or someone that they can trust to take their investment forward in a respectable way. A decade ago, there was no way to put out feelers to hundreds of friends and associates in a short time, but now you can easily do that through your online networks.
2. Online cloud storage and backup solutions
There will be times during this process when you need to think and act quickly. In the past, you had to call back to the office to get the numbers that you needed, or you had to fire up your PC to take one last look at that spreadsheet. Now, you can just pull up the relevant information on your phone using an enterprise online cloud backup solution.
Cloud backup solutions give you the tools you need to think and act on your feet, regardless of where you are. These technological tools help you organize your phone numbers, emails, notes, financial statements, spreadsheets, contracts and any other important information in one spot. You can add files while on the go using a smartphone app and then sync everything so all of your files are easily accessible on your PC or laptop.
3. Dynamic calculators
The listing price may reflect a lot of things, including the current owner’s connection to the business. These feelings often skew the owner’s ability to price the business at fair market value, but if you have the right tools available, you can determine what the business is truly worth and create a fair offer.
Ideally, you should calculate the average cash flow and apply an industry-determined multiple to it. Now factor in the growth rate and you will be able to make a fair offer. To help you crunch the numbers, BPlans has a set of cash flow calculators, starting costs calculators, and a host of other financial tools that can help you determine not only the right offer to make, but how lucrative the business may be once you take over. With these tools, it becomes easier to make an offer confidently and safely.
4. New funding opportunities
According to data collected by Coleman Information, only 27 percent of those who apply for business loans are approved. At least two-thirds of the survey’s respondents claim they exclusively visit banks for loan applications, but as the Small Business Administration reports, the high rejection rates are encouraging many entrepreneurs to look for funding in other places.
One option is a revenue-based loan. This type of loan requires the entrepreneur to have at least ten percent of the loan value in the bank in cash. It is a viable option for anyone who wants to buy a business but doesn’t have good credit. Some entrepreneurs are taking cash advances based on projected credit card sales, and others are partnering with so-called credit partners, or peers who co-sign loans. Thanks to diverse options like these, it is easier to get the funding that you need to buy but it does mean looking high and wide.
If you would like more information about buying a business please visit my webpage Buy a business or buy a copy of my book: Successfully buy your business. For more immediate help with buying a business you are welcome to send an email to Andrew Rogerson or give me a call on 916 570-2674.