Category Archives: Buy a Business

What you need to know before buying a business.

by P. Simon Mahler

Rather than building a small business from the ground up, buying an existing company offers the opportunity to move along the path to entrepreneurship more quickly. With all of the startup tasks already taken care of, a staff in place, an established customer base, existing vendor relationships, and processes and procedures laid out, you have a head start.

But that doesn’t diminish the importance of doing your research before making the decision to buy a business. Acquiring an existing business small business requires substantial examination so you avoid many pitfalls that befall eager entrepreneurs who leap before they look.

Investing in a business is the same as investing your savings in a mutual fund or stock portfolio to secure both your future and possibly your retirement. You should study and review the past performance and the current condition and seek help and advice from professionals on the prospects for the future.  Continue reading

Thinking about buying or selling a business?

Make sure you understand buy-sell agreements.

by Kelly Deis of SoundPoint Consulting

Buy-Sell Agreements are legal documents that govern how ownership will change hands in privately owned companies if and when something significant happens to one of the owners.

These agreements are intended to ensure the remaining owner(s) control the outcome during critical transitions, while making sure the transitioning owner (or their estate) are treated fairly and equitably.

Although owners may have the same interests while both are in the company and all is going well, these same owners may have wildly divergent desires and needs after a triggering event occurs.

It is not too hard to imagine a scenario where one wants operational stability while the other needs liquidity. For instance, if a partner dies, the remaining owner wants business as usual, while the deceased’s estate wants to cash-out.

The interesting thing about Buy-Sell Agreements is that you do not know which side of the transaction you will be on when the agreement is drafted. Because of this, it is in both party’s interest to make them as fair and equitable as possible.

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Some day you will want to sell your business.

Asset or Stock Sale How do they Differ?

by Kelly Deis of SoundPoint Consulting

So, you want to sell your business. For most of us, it is a once in a lifetime event. There is no reason to expect that you should know the intricacies of a transaction.

That is why it is oh so important to have good advisers help walk you through the process.

One of the fundamental decisions you will need to make is whether the transaction will be an asset or stock sale. It will depend upon your individual circumstances as well as your business structure.

If you are an LLC, then a stock sale is not an option as there is no stock to sell (although owners may sell their membership interests).

S-Corps have the option of the 338 election which treats the transaction as a stock sale for legal purposes and an asset sale for tax purposes, but that is WAY beyond the scope of this newsletter.  Continue reading

Ask SCORE: What do I need to know before buying a business?

Rather than building a small business from the ground up, buying an existing company offers the opportunity to move along the path to entrepreneurship more quickly. With all of the startup tasks already taken care of, a staff in place, an established customer base, existing vendor relationships, and processes and procedures laid out, you have a head start.

But that doesn’t diminish the importance of doing your research before making the decision to buy. Acquiring an existing small business requires substantial examination so you can avoid the many pitfalls that befall eager entrepreneurs who leap before they look.  Continue reading

What is a franchise and should you buy one?

You’ve heard the word “franchise,” but what exactly is one? A franchise refers to a system of doing business in which a parent company (the franchisor) sells the rights to a system of doing business to individuals (franchisees).

Each franchisee pays a franchise fee in order to buy into the system, then pays ongoing royalties for the right to continue using the franchise’s name and trademark. Most franchisors provide franchisees with initial training, as well as ongoing support that typically includes marketing materials, suppliers of inventory and more.

McDonald’s is probably the most famous franchise in America, but franchising isn’t limited to the fast-food industry. You can find franchises in just about every industry, from retail stores and restaurants to business and personal services, such as accounting, hair care and fitness.

Whatever type of business you’re thinking of starting, there’s probably a franchisor that can help you do it. But is buying a franchise right for you?  Continue reading

It’s a great time to buy or sell a business.

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The economy is solid for both business buyers and sellers.

Do you want to own a business but don’t like the idea of starting one from scratch? Maybe buying one is a better option. Or do you want to sell your small business to pursue other endeavors? Download our infographic to learn more on small business transactions.

The sales of small businesses jumped from 2012 and have been stable since 2013.

  • In 2012, 4,730 businesses were sold
  • In 2013, 7,056 businesses were sold
  • In 2014, 7,494 businesses were sold
  • In 2015, 7,222 businesses were sold

The prices of small businesses are also increasing.

  • In 2012, the median asking price was $187,000 with a sales price of $164,000
  • In 2013, the median asking price was $195,000 with a sales price of $180,000
  • In 2014, the median asking price was $200,000 with a sales price of $185,000
  • In 2015, the average asking price was $225,000 with a sales price of $199,000

Average prices by industry.

  • Internet B2B small business = $364,400
  • Gas station = $320,000
  • Business/Medical Services = $272,400
  • Restaurants/Bars = $155,000
  • Internet B2C small business = $154,000

Restaurants accounted for 22% of all business sales in 2015, the highest of any industry.

Tips on buying a small business.

If you are planning on buying a business, brokers suggest investing less than 15% of your net worth. They recommend keeping at least 10% of liquid assets free. Expect to pay around 20% to 40% of business costs out-of-pocket.

Tips on selling a small business.

Start planning two to five years in advance, and learn the due diligence process. Consider seller financing which may increase your price by more than 15%. But maintain realistic expectations by researching business prices in your industry.

For more data and suggestions on buying or selling a business, download our infographic. Remember to consult an experienced, trusted SCORE mentor for help with your individual situation.

Are you thinking about buying or selling a small business?

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Ever thought about starting a business but weren’t sure if you wanted to build one from the ground up? Buying a business could be the best way to fulfill your entrepreneurial dreams.

Our new infographic, “It’s a Great Time for Buying or Selling a Business,” looks at how small businesses change hands in the United States.

After jumping in 2013, small business transactions have remained stable with around 7,000 businesses bought or sold each year. “Part of the reason transaction activity stabilized in 2015,” BizBuySell reports, “may be that small businesses continue to grow financially healthier, allowing owners to ask for more money, creating a more balanced market.”  Continue reading