Time is Right to Buy a Business
How do you know if the time is right to buy a business? This might just be the perfect time for you to start or expand your entrepreneurial ways by purchasing an existing business.
Statistics show that purchases of small businesses are at very high levels, and you’ll be able to leverage a loyal customer base, an experienced work force, and the opportunity for increasing cash flow. Experts say that it’s still very much a buyer’s market, but there are signs that it’s starting to move towards an even split. So get going!
Whether you are looking at becoming a first-time business owner or buying another business entity to expand your company’s footprint in the Sacramento area or elsewhere in California, you should think about these issues and discuss them with an experienced business broker.
What’s the current and anticipated demand for this business’ products and services?
Some buyers will purchase companies based on their own personal interests instead of looking at whether the concern is successful and thriving. Just because you’re a coffee connoisseur doesn’t mean that you can make a new coffee shop thrive when there are similar businesses up and down the street. Think through the logistics, competition, and what your business provides in the way of a competitive advantage.
How are the financials?
You and your business broker need to ask for bank statements, profit and loss statements, vendor contracts, leases, and the seller’s tax returns in their due diligence process. Ask for revenues with detailed numbers separated out by key product areas and customer groups. Look at possible trends over time and inquire about existing prepaid services and memberships, because as the new owner you’d have to honor those without seeing any cash. You might be brewing a lot of coffee before a customer actually hands over some money for a cup of joe.
Can you do this all day?
It’s hard to find a business that works only for investment purposes. Most businesses can’t run themselves like a passive investment can—think real estate. Even with experienced employees and managers, you’ll need to be around to pitch in. Consider observing your potential acquisition firsthand to see if you can commit the hours that it will require.
Do I know why the seller is selling?
Ask the seller what they would do differently if they were still running the place. This might give you some indication of their view of the business’ future and the impact of their brand. Along the same lines, find out if the current owner is critical to the success of the business and whether he or she will open up another coffee shop across the street?
Get the assistance you need, ask questions, and be prepared by working with experienced business broker and valuation expert Andrew Rogerson. Andrew would enjoy speaking to you about buying a business in the Sacramento area. Feel free to visit our website Services and choose from the drop down menu the information you would like.
For more immediate help you are welcome to send an email to Andrew Rogerson or give me a call on 916 570-2674.