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Has anyone ever purchased a business

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Has anyone ever purchased a business

Old 05-09-2005, 02:03 PM
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Default Has anyone ever purchased a business

I am believe that I am ready to go into business for myself and have been exploring various businesses that are for sale in my area. I am looking for some advice on buying a business from someone who has been through the process. I am looking for the good, the bad, and the ugly.

Thanks
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Old 05-09-2005, 02:39 PM
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Default Re: Has anyone ever purchased a business

Any type in particular? We have bought a few over the years and have always bought the assets, not the corporation. We have also done all of them with owner financing after a pretty hefty downpayment. You will need to do your due diligence if you are purchasing an ongoing business. Ask to see tax returns, utility bills, payroll records, and anything else that will give you a true picture of how it has performed. Be cautious, there is a reason its for sale. Just my lil ol .02.
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Old 05-09-2005, 05:02 PM
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Default Re: Has anyone ever purchased a business

I've been reading a ton about business lately, but am by far not an expert or even an authority. However, what I have learned is that you really need to do your homework. You'll need to assemble a good soild team (accountants, lawyers, business consultants, etc) to go through this prospective business and weed out the good, bad, and ugly.

Should you purchase, you'll want warranties against things like disgruntled employees, pending lawsuits, and other hidden problems that may arise after you take over.

Start small. There is a learning curve. Aside from that, I can't tell you much more as I haven't done it either. A small business (which I am involved in) is far different than a large business. I basically own a job... A large business has alot more ins and outs and really alot more oppertunity for its owner.

It would help you to find a really good business mentor that you can learn from.
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Old 05-09-2005, 05:43 PM
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Default Re: Has anyone ever purchased a business

To add to what Ringleader said, do a pro-forma on what you picture happening. Be honest, or even a little pessimistic, with yourself. Would be better to be pleasantly surprised later than vice versa. Also, there are numerous "mentoring" groups around the country comprised of ex-business people. CEO's, accountants, attorneys, that will pick apart the pro-forma you present. Would be a good drill if you can find one of these groups.
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Old 05-10-2005, 05:14 AM
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Default RE: Has anyone ever purchased a business

Having just purchased a business a year ago. There are a lot of things to think about like:

1 - Get an accountant, one that you trust, and one that deals with small business. Not your moms best friend that does bookkeeping, but a real live small business accountant.

2 - How do you value a business, this is a tough one because not knowing the type of business it is hard to say, but a good rule of thumb is : 2 to 3 times the cash flow. Once again the accountant can look through the income statements and balance sheets to determine cash flow. Maybe a little more if there are special assets.

3 - Be very wary of any business that will not show you their financials and tax returns, means they are hiding something.

4 - Be very careful about how you are going to pay for the business, if you have to get a big loan, make sure you can still make it if you have that big payment each month. Especially if you hit a down period.(Been there and done that one).

5 - As shag said earlier, alot of people buy just the assets, the only problem with that pertains to the type of business you are buying. Because lets say it is a business that has to buy from distributors or other businesses, if you just buy the assests you have to setup a new corporation. And even though you might be buying a business that is 10 years old your terms and such with the distributors and such will be based on the new corp. So you might even get dropped by the distributors that currently sell to the business you are buying. (Been there and done that one as well). Also you have to get new business licenses and sales tax ids and such for the new corp, and also all of the bills have to be moved into the new corp name, ie:power bill, phone bill. Which means new deposits and such which can add to take over costs.

6 - How much of the current business is tied to the current employees? Believe me this matters, if any of the sell for the business and they don't like the management change then they might leave and take some of the current business with them. Sure you can have them sign a non-compete. But you still have to sue them, and it takes a long time and a lot of money to do it.

7 - If you go through with the deal, get the current owners to sign a non-compete. ie: for a 50 mile range they will not go out and start up a competing business.

8 - You want the current owners to hold some of the loan, because then they will want the business to continue to be successful, so they will get paid.

9 - If they are using a business broker, do not under any circmumstances believe anything they say. Listen to you accountant.

10 - DO NOT SIGN anything until you are sure 100% that you want to buy the business. Lot of sneaky business brokers and business people out there. You think buying a boat is tough.

One big one is emotion. Don't get emotionaly attached early on. The numbers will tell you if it is a good deal, if the numbers don't add up then it probably isn't a good deal.

There is a lot of other things, drop me a pm if you have any specific questions. I have been through starting up a business and buying one. So I am pretty familar with what mistakes can be made.

Dean
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Old 05-10-2005, 07:09 AM
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Default Re: Has anyone ever purchased a business

at a minimum get a Bookkeeper and do not rely on something like Turbo Tax. For one, if there is a mistake made, your bookkeeper will be at your side giving you advice as to what to do and how to handle problems.

Penalties and interest add up VERY quickly when you owe the IRS.
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Old 05-10-2005, 07:59 AM
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Make sure your employees sign non-competes and non-disclosures. You need three advisors: an attorney, an accountant and an insurance agent.

Owning your own business is very rewarding but full of risks. You never work for yourself but always for your customers/clients and your employees.

Good Luck! It's worth the struggle.
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Old 05-10-2005, 08:20 AM
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Default Re: Has anyone ever purchased a business

I thought about becoming a pimp back in college.. Does that count?

Sorry...
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Old 05-10-2005, 10:55 AM
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Default Re: Has anyone ever purchased a business

Thanks for all of the great advice. I am working to assemble my team (lawyer, accountant, mentor, etc) as well as networking to find the right business for me. The business brokers have some attractive opportunities, but if it sounds too good it probably is.

The only thing I have decided at this point is that I want to purchase an existing business rather than starting my own.

It is definitely the largest purchase I will ever make and I am moving forward very cautiously.

Thanks again for the great advice.
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Old 05-10-2005, 11:02 AM
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Default Re: Has anyone ever purchased a business

one thing you may consider, which worked well for my father in the past, look for a business that is privately owned, as in not incorperated, with an alcoholic/drug using owner who is in debt, every town has one or two that fit this description. The nice thing about this, they are normally willing to sell for pennies on the dollar just to cover their a$$. You have to be carefull and make sure that it actually has potential, but it's not necessarily a bad way to get into a business.
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Old 05-10-2005, 12:10 PM
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Default Re: Has anyone ever purchased a business

I have owned my own business for the past 2 years and I would recommed if you borrow money to stretch the payments out as long as possible to get them down. You can always pay more if you have it in hand. It is nice if the owner will finiance like said earlier it keeps them with a vested intrest. But most import is to review the financials.
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Old 05-10-2005, 01:29 PM
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It would be helpful to know what type of business you’re interested in, product based or service based??????? How many employees are you willing to deal with????? What amount of annual income (for the company) is it going to take to make things profitable?????? And the questions will go on and on…….

I am a management consultant and work with companies to either increase the bottom line or suggest solutions to existing problems or in some cases help them break into new markets. Some companies that are for sale on the open market aren’t worth owning because things are sooo screwed up that it would take years and millions to straighten them out, but I try anyway………

Determine what you’re looking to buy and get back to us………..
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Old 05-13-2005, 11:59 AM
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Default Re: Has anyone ever purchased a business

I appreciate the great advice and have been putting together my team of advisors (lawyer. accountant. mentor, banker).

After talking with several business brokers, I am convinced that my best bet is to find a business that is either not currently listed for sale or is not for sale.

I have also reached out to my network of friends and business contacts for leads, and I have already come up with one possibility. I should have the financials early next week.

I am sure that I will be back for more advice and input.

Thanks

Rick
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Old 05-13-2005, 12:25 PM
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Default Re: Has anyone ever purchased a business

If its a restaurant, marina, bait store, gun shop, liquor store or house of ill repute, let us know!
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Old 05-13-2005, 12:30 PM
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Default Re: Has anyone ever purchased a business

Shag - 5/13/2005 1:25 PMIf its a restaurant, marina, bait store, gun shop, liquor store or house of ill repute, let us know!
dont' forget the other important ones such as:

strip club
boat dealership
car/truck dealership
bar
electronics store

and most importantly GAS STATION
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Old 05-13-2005, 12:49 PM
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autobaun, you are wise beyond your years.
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Old 05-13-2005, 02:01 PM
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Shag - 5/13/2005 1:49 PMautobaun, you are wise beyond your years.
sad thing though, most of it is useless info, oh, and I left one out,

a friend with a bank would be handy, wait, nevermind, got that one covered, granted, they are my dad's friends that run it, but whatever, I still benifit.
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Old 05-13-2005, 02:50 PM
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Default Re: Has anyone ever purchased a business

It;s funny that you mentioned the strip bar and boat dealership, a local broker has one of each for sale.

The strip bar has great cash flow and I can only imagine the fun having an office there similar to Tony Soprano and interviewing dancers. You know you have a good business when women pay you to take their clothes off.

The broker is going to follow up on the boat dealership with me on Monday. The annual sales were $1.2 million with a cash flow of $130,000. The asking price is low at $250,000, but I am sure you get what you pay for.

How about a boat building business? The HydroCat business is for sale on EBay.



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Old 05-13-2005, 05:23 PM
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Default Re: Has anyone ever purchased a business

Blue sky means nothing unless its a multimillion dollar corp.

If you buy a going concern you want to throw out all inventory that is more than a year old, get long term low rate financing where only the same business assetsare used for the loan garantee, intimately know how to operate the buisness you are proposing to buy, have a talk with the major customers who you expect will continue to make your nut, and try to get one with a sizable loss on the books that you can profit against without paying taxes.

Anything else is just blowing your money, and that is more fun and quicker to do in Las Vegas.

Seriously, if you are asking these kind of questions, you have no idea what you are getting into.
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Old 05-15-2005, 05:03 PM
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Default Re: Has anyone ever purchased a business

The post by Bellsisland is very good, i have been in business for 38 years as a professional. Play everthing very close to the vest, talk to your wife and or your best friend about your basic thoughts. I started my own business, if i had found a company that i liked i would have brought it. Always, i repeat always sleep on items you are not familiar with. Make a decision the next day. Haste makes waste. good luck
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