Category Archives: Buy a Business

Saying “I Do” to a franchise.

Like marriage, buying a franchise is a long-term commitment.

Before you say yes, make sure you understand to the in’s and out’s of franchising what it takes to be successful.

The Commitment

franchise opportunity

Be Your Own Boss. The phrase is repeated often in franchise circles, and it can be intoxicating to those considering franchise ownership. It means freedom from the typical 9 to 5. It means control. It means you call the shots. All of this is true, but being your own boss also means that you have responsibilities.

You are responsible for your employees, your customers, and your business. Their well-being is in your hands. That is why it is essential for anyone considering franchise ownership to weigh all the factors that go into being the boss and understand what it takes to be successful. Franchise ownership is a long-term commitment much like a marriage. It’s good to treat it that way, from courtship – researching franchises – to “I Do” – signing the Franchise Agreement. Remember the goal is happiness and financial independence.  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 a business. Acquiring an existing small business requires substantial examination so you avoid the many pitfalls that befall eager entrepreneurs who leap before they look.  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.

Continue reading

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

Tips on buying an existing small business or franchise.

The dream of owning a small business doesn’t always mean starting from scratch. You can skip the headaches of creating a startup and jump to buying an established company. Purchasing a franchise offers another path to entrepreneurship. With either option, someone has already developed a solid foundation for a company. Here are some resources to help you decide if buying an existing independent small business or franchise is right for you.

Research Your Options

Even if a business seems successful on the outside, a closer inspection before purchasing is critical. In the SCORE podcast, “Buying a Business,” mentor Norm Silverstein details how to thoroughly examine an existing company.

When you acquire an established business, you inherit important intangible assets, such as a customer base and brand recognition. Risk is potentially lower than owning a startup because you will have immediate cash flow. Also, the previous owners have hopefully ironed out the kinks in the beginning stages allowing you to focus on the future.

After finding an affordable, promising business, Silverstein recommends using a “due diligence” process to determine if the company is a right fit. Some of the financial factors to investigate include:

  • Profit and loss statements from previous years
  • Projected financial statement
  • Last three years of tax returns
  • Cancelled checks
  • Lease conditions

You want to learn as much as possible about the business beyond what the seller tells you. An attorney, accountant and a SCORE mentor can advise you during this intensive process.

Ready to Purchase?

You found your dream business, which passed a thorough investigation. Now what? You must decide whether to purchase the business entity or its assets. These are the major differences:

Buying the “business entity” entails buying the corporation or limited liability company (LLC). You inherit the assets and contracts but also its debts. You may not know what is lurking beneath the surface, such as tax liens or unpaid loans.

Buying the “assets” means you are buying the tangible items like equipment and property. However, you must create a new company with new loans, leases and contracts as if the seller’s business no longer exists.

For more details on the types of purchases, read the entire “Buying a Small Business: Assets vs. Entities” article.

Buying into a Community

Another road to small business ownership is purchasing a franchise. Bob Melberth, a franchisee coach, details the pros and cons in the SCORE podcast appropriately titled, “Franchising.”

What exactly is a franchise? An entrepreneur buys the license of a larger trademarked company to sell its products or services. The new offshoot is backed by a well-known brand name, training and support from the larger company and fellow franchisees. Melberth says, “You’re in business for yourself, not by yourself,” highlighting the community aspect of owning a franchise.

With this established business structure, the success rate of a franchise is usually higher than an independent business. You don’t need to be an expert in all aspects of running a company because the franchise provides specific guidelines to help sell their products. Even though it’s a franchise, it’s still your business.

Finding your ideal business can be a lengthy, involved process, but remember that you don’t have to do it alone—a SCORE mentor can help you along the way. After thoroughly examining the foundation, you may find an existing independent company or franchise is the answer to your small business dreams.

About the Author: Bridget Weston Pollack is the Vice President of Marketing and Communications at the SCORE Association.

Are you thinking about buying or selling a business?

This topic came up during a recent meeting with one of our Kitsap SCORE clients. Actually, the question at hand was about selling a business, but the search for potential resources lead to an interesting, online resource for those who want to buy or sell.

To see a list of business currently for sale in Kitsap County, click here.

BizBuySell claims to be the internet’s largest business for sale marketplace. It lists businesses of all types, including established retailers and service providers, home-based businesses, potential startups and franchises. Potential buyers search by location, business type, and other preferences. Sellers can list their offer themselves or through a business broker.

They offer a free digital book called, “Guide to Selling Your Small Business” by Barbara Findlay Schenck. If you would prefer not to give them your name and contact information in exchange for the book, simply Google “Guide to Selling Your Small Business” to find a lot of other resources.

If you find this information useful, please leave a comment. If you have found an alternative resource for buying or selling a business that you refer, let us know. We’re committed to sharing the best information with Kitsap business owners that we can find.