What Buyers Look For In A Business Opportunity
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You have built a great business with love and care. It has grown larger than you’d ever imagined, and generates a nice profit that has allowed you and your family to live comfortably. Now you’re ready to sell. You assume there’s a buyer out there who will pay you a fair price and then nurture the company with the same attention you have. What’s more, selling the business is a major part of your retirement plan.
Needless to say, buyers look at businesses differently than sellers. So to achieve the outcome you want, it’s important to think like buyers and understand how they evaluate a business.
What Buyers Look For?
There are many types of buyers: strategic and financial, individuals, companies, and private equity funds. Despite differences, all buyers consider how much they’ll invest to acquire a business, the amount of risk they’ll bear and the potential return on their investment. To evaluate an opportunity, buyers focus on three major areas:
1. Cost and terms
- What will it take to acquire the business? How much cash and how much debt? What are the deal’s terms and conditions?
2. Continuity
- Will the business continue to operate similarly after the sale? Much of the risk of buying a company relates to continuity. For example: The current owner has personal relationships with customers, distributors or vendors that the new owners may have to struggle to maintain, the owner has special expertise that is undocumented and difficult to learn, Key personnel aren’t committed to staying, or outside competition looms. Sellers armed with solid responses to these types of continuity concerns are more likely to get their desired price. Even if you don’t want to sell your business for a few years, take steps now to ensure it can run smoothly without your personal involvement. That independence could be worth millions when you sell.
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Existing Over Starting Fresh
By JoAnn Lombardi, VR Business Brokers/Mergers & Acquisitions, President
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Buying an Established Business Gives You the Best Chance for Success
There are many reasons why you should buy an existing business over starting up one. As a business owner, you are able to have the advantages of job security, financial independence and controlling your own destiny – professionally and creatively.
Reaping the Benefits of an Established Business... Buying an established business has allowed someone else to take the initial high risks and investment with the start-up process. Only through buying an existing business will you be able to reap the benefits such as having:
√ An established location and customer base; √ Existing cash flow; √ Already proven product-line; √ Surplus of inventory; and √ In-house workforce.
Why Avoid Starting a Business from Scratch?... According to a recent survey, 75% of new businesses fail within the first 3 years due to a variety of different elements:
√ Opened in a highly-competitive area; √ Lack of working capital; √ Poor-quality product; √ No management skills; √ Inability to develop an established customer base.
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Middle Market Business Growth Projections on the Decline
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At the end of last year, an all-time high — 73 percent — of middle market company executives reported that their company’s overall performance exceeded that of last year, according to the National Center for the Middle Market. In Q3 2019, that number was 60 percent, down from 68 percent in Q2, according to the organization’s Q3 2019 Middle Market Indicator report, released last week.
This figure is indicative of the report’s overall findings — while performance is still relatively solid among middle market organizations, growth rates are declining, hiring rates are slowing, economic confidence is wavering, and companies are adjusting their expectations for expansion in the coming year. “Overall, leaders appear to be taking appropriate steps and hedging their bets for the time being, perhaps responding to growing national and global economic uncertainty. As attitudes and behaviors shift toward conservatism, many leaders are focusing internally on ways to cut costs and drive efficiency to ensure they are prepared for whatever the coming months bring,” according to the report.
Here are four takeaways from the National Center for the Middle Market’s Q3 report:
1. The percentage of companies adding jobs dips under 50% for the first time
in 2.5 years:
- For the past 2.5 years, more than half of middle market companies reported adding jobs, vs. 46 percent of companies this quarter. Year-over-year employment growth also fell this quarter vs. Q2 2019, from 6.4 percent to 4.1 percent, and the projected rate of growth for the next year is only 2.5 percent — the lowest number since 2014. Companies with annual revenues under $100 million were less likely to have added jobs than those with revenues between $100 million and $1 billion.
2. Middle market leaders are confident in their local economics — the global
economy, not as much:
- While 81 percent of middle market executives remain confident in their local economies, the figure for the global economy is much lower at 55 percent. This reflects a major decline from Q1 2018, when the figure was 82 percent. Confidence in the U.S. economy was 76 percent this quarter — lower than the five-year average of 79 percent.
3. Talent management is a persistent challenge:
- Even as company’s hiring plans become more modest, today’s middle market companies struggle with retaining workers given low unemployment rates and persistent skills gaps, particularly in certain sectors. According to the report, 55 percent of companies cited talent management as a pressing short-term challenge and 46 percent as a long-term concern.
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Six Reasons To Be A Thankful Business Owner
By: Storm Miller, Benetrends, Inc., National Account Manager
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As we approach the holiday season, we find ourselves reflecting on the past year, measuring our successes and focusing on ways to avoid potential pitfalls. Only then can we can start formulating our goals for the New Year. Looking back, we find that we are thankful for the circumstances that bring us to the present. As a business owner, there is much to be thankful for, from freedom and flexibility to the technology we use to run our businesses. We’ve come up with six reasons to be a thankful entrepreneur:
- You have a great boss. Of course you do, because it IS you! As a business owner, you have control over the decisions of your business: things like who to hire, the type of inventory you hold and even the numbers of hours you choose to work are but a few of these decisions. Of course, having all the control can come with a downside. You may not have the funds to hire help, or to purchase large amounts of inventory, and you may feel like you are working 24/7, but remain positive that the hard work now will benefit you and the company later. And don’t worry that your efforts will go unnoticed – nothing gets by your boss.
- Your support system. Whether it’s the corporate office, a great group of employees, family and friends who offer encouragement (and occasionally pitch in to help), or even the regular customers of your business, a business owner has many people who offer support on your entrepreneurial journey. Additionally, your support system can include outsourcing services, like accounting or payroll services, allowing you to focus on the strengths you bring to the business.
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Location Dry Cleaning Plant with Drop Center | $600,000 | Raleigh, NC
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Here's your chance to own and operate a very profitable hair salon in a perfect location. Salon has been in business for over 15 years, with a solid base of repeat customers. Owner/Operator has established a sterling reputation in the community through consistent, excellent service. Salon also has a great retail footprint that allows a new owner to grow! Owner currently employs 5 persons, but has 9 stations available. Here's your chance to double sales and become one of the biggest salons in town!
This could be a rare opportunity for an investor. Employees want to stay on after the sale, so a smooth transition is easily achievable. Owner is willing to train and will agree to a non-compete agreement. Make an offer today on this fantastic opportunity, as it won't last very long!
For more information:
David Meeuwsen
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This was a very unique retail boutique business with multiple locations and very strong cash flow. This boutique, with a unique concept offered a charming, one of a kind product at reasonable prices. Dedicated to supporting local vendors and always seeking the latest and greatest in décor and fashion. They specialize in products such as; gifts, home décor, furniture, fashion clothing, jewelry, kids clothes, accessories and much more. Providing one of a kind shopping experience with many items that cannot be found anywhere else. This is a successful, well respected business with strong name recognition. It boasts a loyal following with over 600 repeat customers and a history of longevity in the community. It is highly reviewed online and is the clear leader in this industry. An exceptionally strong cash flow (SDE) made this a business the buyer could not afford to pass up.
Congratulations to Jeff Child.on this successful transaction!
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Thinking of selling your business or looking for an established
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Have You Ever Considered Selling Businesses?
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