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Buying A Business... The Sequence of Events

Tired of the volatility in the stock market? Diversify your assets through business ownership. Acquisitions of existing businesses are at an all time high due to the immediate high returns and established business operations. Individuals, corporations and financial buyer groups are all actively scouring the countryside for existing businesses. It is usually much safer and more profitable to buy an exisiting business than starting a new venture. According to the Small Business Administration, over 50% of startup businesses fail due to unproven concepts, lack of working capital and poor management.

Advantages of Buying an Existing Business

  • Some of the advantages in acquiring existing businesses include:
  • Being able to review a company's existing track record as reflected in P&Ls, tax return and other financial records can be very helpful in determining expansion plans. Growth potential can be measured based on actual experience rather than conjecture associated with startup ventures.
  • The need for additional working capital is reduced to the immediate cash flow generated by acquired company.
  • Obtaining skilled employees who are familiar with the business operation and market.
  • Gaining established customers significantly reduces the time it would otherwise take to attract an adequate number of customers to support the overhead of a new operation.
  • Obtaining existing licenses and permits can often reduce the time and cost of making application, gathering information and comforming to required regulations.
  • Sources of capital to purchase existing businesses are more readily available than startup ventures. It is very common for the owner of an acquired business to finance part of the purchase price. Banks and other financial institutions prefer to loan money for existing operations that have a proven track record.

The Sequence of Events

Buying a business is serious business and should not be taken lightly. Working with professional advisors is the key to succesfully finding and purchasing a business. Friends and well meaning relatives are not usually qualified to provide the specialized advice needed for a business acquisition. Seek out an experienced business broker who can assisit you in finding a business and coordinate the sequence of events. Utilize an accountant who can help you with the due diligence process and advise you on tax and record keeping issues. Obtain legal advice for business organizational requirements and legal documentation for your acquisition.

Finding a Business to Buy

While there are a number of ways to find businesses for sale, utilizing the service of a business broker can greatly expedite the process. Business brokers are sometimes referred to as the "Supermarket" of businesses for sale. When selecting a company that specializes in selling businesses, verify the following information which will help ensure that you are properly investing your time and money.

  • Are they full time business brokers, rather than a firm that handles business sales as a sideline?
  • Are they a member of the Business Brokers of Florida (BBF)? As a member of these organizations, brokers are obligated to adhere to practice standards and code of ethics.
  • Ask for reference of former clients and customers or abtain a recommendation from other professionals.