Acquiring a business immediately puts you in the driver’s seat.
One of the most fundamental career choices an individual must consider is whether to work for someone else or work for themselves. However, working for yourself sounds somewhat similar to starting your own business. This thought makes some people queasy and seems pretty risky. Additionally, it requires an excellent business idea, which you may not have readily available. However, there is Door Number Three: buying an established and profitable business immediately puts you in charge.
Termed “entrepreneurs through acquisition,” these business purchasers consistently seek businesses with enduring profitability. These are businesses that are more apt to have a stable income over time. Additionally, they’re attractive to lenders and investors. They will provide funds for your acquisition. OK, these aren’t sexy fast-growth tech companies that make headlines on all the TV business channels. They’re companies that have two characteristics. These may make them appear to be “boring” and dull, but in reality, these characteristics make them enduringly profitable.
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Recurring customers
The main essential component of enduringly profitable smaller businesses is not a rapidly expanding customer base. Instead, it’s that they have recurring customers who form a very loyal and strong customer base. These types of companies can attract and maintain the right customers. These customers value the company’s products and services and will continue to purchase them year after year.
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Slow Growth
Although astronomical growth makes headlines in business journals, it’s accompanied by high risk. High growth results in new customers outnumbering the existing ones. These new customers may not be loyal to your brand or the company.
These new customers may have new demands and cause disruptions or changes to your business workflow. In addition, those headlines of your astronomical growth will also attract competition, looking to capitalize on the expanded market and the opportunities you’ve created.
However, low growth means low risk, which is crucial when your money is at stake. The pace is slower with an established business that grows more slowly. This allows you to get to know your customers and forge lasting relationships with them.
They’ll tell you what it is they value, which will help you with your future business strategies. Slow growth pays the rent and makes payroll month after month. Boring? Sure, but you sleep a lot more soundly knowing that you’re being steadily successful in the long run.
Secrets to Acquiring a Business With Real Estate in California
No real secrets to buying a business. Running your own company allows you to lead an organization, make impactful decisions, and enjoy the flexibility that enables you to work in a way that best suits your needs. By purchasing an enduringly profitable, slowly growing firm, you can combine the opportunity for professional independence with the stability of buying an established and profitable small business.
You’ll have many questions to ask when you’re buying a business. Working with a qualified business broker in California will pay dividends. Your business valuation consultant will help you review the documents and the business climate. They will also examine the industry, allowing you to make an informed decision that will build your business for the future.
There is simply no “one size fits all” approach, whether selling or acquiring a business with real estate. Here are some other factors to consider.
- Some California business owners who also own real estate simply prefer to keep the Real Estate and offer a lease to the Buyer of the business. Suppose a decision has been made to sell the company, before a final decision is made about whether to also offer the commercial property for sale. In that case, the following are essential items to consider.
- How critical is Real Estate to the operation of the business? For example, if the company is a gas station or a car wash built on the Real Estate the business operates from, it may be hard to sell just the business and offer a lease to a Buyer. This is because the company cannot be moved easily and readily.
- Is the Real Estate just land, or does it include buildings or structures on the Land? If it includes buildings or structures, are they in good condition, or do they need repairs and maintenance? If repairs and maintenance are required, is the Seller willing to pay those costs so that the buildings and structures are brought up to date and in compliance with the latest building code?
- The Buyer will probably want a lease for the Real Estate. If the Buyer wished to have a three- or five-year lease with options but only stayed for the initial lease and then left, would the Real Estate owner easily find a replacement tenant? Suppose the Buyer is obtaining an SBA loan. In that case, they will require at least that matches the loan’s typical 10-year term, or the Seller of the business has allocated an amount for rent. Is this amount a market rate or the amount the owner of the Real Estate is willing to accept as rent? If there is no rent allocation or the rent is below the market rate, and the Buyer has to pay a higher rent, it will lower the value of the business as expenses are higher.
- This also applies if the business owner has not been paying property taxes, building insurance, or maintaining the Real Estate and now expects the Buyer of the company and Real Estate to cover these costs.
- Are there any environmental issues on or near the real estate? If so, this may lower the value of the Real Estate and the business.
- When was the last time local zoning ordinances were reviewed, so that if the Real Estate is put on the market, it is ‘smooth sailing’ to close the sale?
- Related to local zoning ordinances are local Use requirements typically defined at the municipality level.
- Is the Real Estate part of a flood zone?
- Sample report of California Commercial Real Estate with basic property overview, environment, building, value, and more.
- Sample report of California Commercial Real Estate with climate check including flood, fire, storm, heat, and more.
- Sample report of California Commercial Real Estate property of the environment with regulatory summary and neighborhood.
- Sample report of California Commercial Real Estate flood certificate.
- Sample report of California Commercial Real Estate with property condition report, site summary, building summary, hazard risks, and more.
- Sample report of California Commercial Real Estate estimate of value.
How to Sell a Commercial Property Fast with a Business in California?
Are you looking to sell your commercial property and business in California?
A crucial first step is to get an accurate business valuation.
This is not only important for you as the Seller, but also for potential buyers and lenders. This is particularly true if the Buyer requires financing.
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Other Commercial Real Estate topics to consider.
