Why Investors Love the Lower Middle Market

In a world where investors want to make money, it's easy to see why they love the lower middle market. Here are some of the reasons why:

1. The lower middle market is less volatile than other markets

2. They have a strong history of growth and stability

3. They have a long track record of paying back loans in full and on time

4. They have a higher rate of return than most other investments

Investors love the lower middle market because it's a great opportunity to diversify their portfolios, and many of them see this as a chance to make a positive impact in the world.

From an investor's perspective, the lower middle market is often overlooked because of its size. But this can be a huge advantage for investors who are looking for opportunities where they can get involved on a personal level. There are plenty of opportunities for investors to connect with people in this market, which helps them feel like they're making a difference through their investments.

The lower middle market offers the best of both worlds: the opportunity to grow, and a relatively low-risk entry point.

Investors love the lower middle market because it gives them access to big opportunities without requiring as much capital. Lower middle-market companies have high growth potential, but they aren't nearly as large or well known as their upper-middle market counterparts. So there's less risk involved in investing in them—you can see real growth and get real gains, but you don't have to commit a ton of money or time to do it.

In addition, the lower middle market has been expanding rapidly over the past few years, which means that investors who invest early are likely to see even bigger returns later on down the line. Companies in this category tend to be younger than those in other tiers, so they have more room for growth than more established businesses do. In addition, because these companies are newer, they often have less debt load than other types of businesses might have at similar levels of revenue.

Finally, there are many different types of investors who are interested in putting money into companies like these—all sorts of people with different backgrounds and expertise can participate in this type of investment strategy!

What is M&A Deal Origination?

Mergers and acquisitions (M&A) deal origination refers to the process of identifying, evaluating, and initiating potential M&A opportunities. This process typically involves identifying target companies or assets, performing due diligence to assess their value and potential fit with the acquiring company, negotiating the terms of the deal, and ultimately completing the transaction.

There are various ways in which M&A deal origination can occur. For example, a company may proactively seek out potential acquisition targets through market research, networking, and strategic planning. Alternatively, a company may receive unsolicited offers from other firms looking to acquire it or its assets.

There are several key considerations that are typically taken into account during M&A deal origination, including the financial and strategic fit of the target company or asset with the acquiring company, the potential impact on shareholders and stakeholders, and the potential risks and opportunities involved in the transaction.

M&A deal origination is typically led by a company's corporate development or M&A team, which may work closely with legal, financial, and other advisors to evaluate and pursue potential opportunities.

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ways to originate M&A deals

There are a number of ways to originate M&A deals, including:

1. Internal sourcing: This involves identifying potential M&A opportunities within a company's own industry or market.

2. External sourcing: This involves looking outside of a company's own industry or market for potential M&A opportunities. This can involve working with investment banks or other financial advisors to identify potential targets or buyers.

3. Networking: This involves building relationships and connecting with potential M&A partners through industry events, conferences, or personal connections.

4. Cold outreach: This involves reaching out to potential M&A partners without any prior relationship or introduction. This can be done through direct mail or email campaigns, or through targeted advertising efforts.

Once potential M&A opportunities have been identified, the process of evaluating and negotiating the deal can begin. This can involve due diligence, financial analysis, and negotiations around terms and conditions.

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methods and approaches to identify potential M&A targets

There are a variety of methods and approaches that companies may use to identify potential M&A targets. These may include:

1. Industry research: Researching industry trends, market conditions, and potential acquisition targets within a specific industry or sector.

2. Networking: Identifying potential acquisition targets through connections and relationships within the industry or through industry events and conferences.

3. Strategic fit analysis: Analyzing potential acquisition targets to determine how well they align with the acquiring company's strategic objectives and business model.

4. Financial analysis: Evaluating the financial performance and potential of potential acquisition targets.

Once potential acquisition targets have been identified, companies may initiate contact through a variety of methods, including direct outreach, letters of intent, or the engagement of financial advisors or investment banks to facilitate the process.

It is important for companies to carefully consider the potential risks and benefits of any M&A deal and to conduct thorough due diligence on potential acquisition targets before proceeding with a deal.

Pros and Cons of SBA Loans: 3 Things That Are Great, and 3 That Aren't

Pros & Cons of SBA Loan

We walk you through the benefits and drawbacks of SBA loans.

3 Pros to SBA Loans:

1. No collateral necessary

2. Lower interest rate

3. Lower down payments

3 Cons to SBA Loans:

1. Longer approval times

2. Borrowing restrictions

3. Good credit needed

Are you debating the pros and cons of SBA loans? Ask yourself the following questions:

• Is my credit score decent?

• Can I wait a little longer for my loan?

• Do I have an established business?

If you answered yes to these questions, an SBA loan may be right for you. On the other hand, there are problems with SBA loans. This program may not be the best choice if you're a startup (even though startups can get SBA funding with additional requirements), if you need a faster loan, or if you have a lower credit score. 

This article will highlight the benefits and drawbacks of SBA loans. Read further to learn about SBA loans.

The Pros 

1. No Collateral Necessary

If you apply for a loan through a non-SBA lender, loan reps may require collateral that's equal to or greater than the loan amount. Collateral can be anything of value, such as a house or boat.

If you default on the loan, lenders can seize the asset. With an SBA loan, however, lenders usually don't require upfront collateral. If they do require collateral, the amount is usually small.

Since the government is backing the loan, lenders feel reassured when approving your application. Therefore, they're less likely to ask for collateral. 

Here is a step-by-step guide on how to get an SBA loan.

2. Lower Interest Rates 

SBA loans offer some of the lowest interest rates within the small business lending world. Overall, an SBA loan interest rate is around 5%. However, the rate depends on several factors, such as:

• Your credit history

• The lending institution

• The amount borrowed

Let's say you're getting a 7(a) loan. If you borrow less than $25,000, and you intend to pay it off in seven years, you could have an interest rate of 7.50%. Conversely, if you borrow more than $50,000, and you intend to pay off the loan in over seven years, lenders could offer a 6% rate. 

The SBA mandates lower interest rates to keep costs low for borrowers. Additionally, SBA lenders are content offering lower interest rates because these loans aren't high risk. Since the SBA is guaranteeing a portion of the loan, lenders don't mind offering loans with lower interest rates. 

3. Lower Down Payments

SBA loans offer lower down payment requirements. With a 7(a) loan, the down payment must be 10% of the loan balance. 

• Example: If you're borrowing $400,000, the down payment is $40,000.

That said, the down payment amount could be 15% for startup enterprises. Companies engaging in mergers or acquisitions may have to place a higher down payment as well.

The amount largely depends on the lending requirements. Some lenders may even require some collateral as part of the down payment. 

The Cons

1. Longer Approval Times

If you're looking for fast loan approval from the SBA, you may want to look elsewhere. SBA loan processing can take anywhere from 30 to 60 days. In some cases, the process could take up to 90 days. The time depends on how fast the lender processes the loan.

On the plus side, processing times are faster through the SBA Express Program. This program is a trimmed-down version of the 7(a) program where borrowers can borrow up to $350,000. Since you're borrowing a lower amount, the approval times are typically faster. 

To speed up the processing times, ensure that you have all the necessary paperwork in order. If you're purchasing real estate, make yourself available to appraisers to expedite the process. If real estate isn't involved, you stand a good chance of faster approval.

Above all, the processing times depend largely on the lender's experience with SBA loans. Experienced lenders will generally streamline the process faster than inexperienced lenders. Therefore, do some research on each lender to root out new SBA lenders. 

2. Borrowing Restrictions

Many lenders don't care how you use the funds, so long as you pack back the loan on time. However, the SBA imposes limits on how borrowers can use the funds.  

• Example: The 7(a) program forbids the purchase of investment properties, such as houses or duplexes. If you want to invest in commercial real estate, you must apply through the 504 loan program, and this program has various restrictions.

SBA loans are primarily for small business owners. They're generally not for investors looking to make risky investments. 

3. Good Credit Needed

An SBA loan program offers flexible terms, but it's not for business owners with bad credit. If you want to get a 7(a) loan, you'll need a minimum score of 640.

However, a minimum score doesn't mean you'll get approved. To increase your chances of approval, you'll need a score of at least 680.

The SBA doesn't mandate a minimum credit threshold, but lenders generally prefer scores in the mid 600s or higher. Getting an SBA loan may be an issue if you don't have a credit history, or if you're a startup with a small credit history. 

Additionally, you must be concerned about minimum business scores. Whereas personal credit scores stretch from 300 to 850, business credit scores are on a scale from 0 to 300. In most cases, lenders look for a minimum 140 score. Some lenders even prefer scores of at least 160. 

Pros and Cons of SBA Loans: Are They Worth It?

The pros and cons of SBA loans depend on your situation. An SBA loan offers lower interest rates, minimal down payments, and no collateral. However, SBA loans are only accessible to those with higher credit scores.

Moreover, borrowers must contend with restrictions that determine how they can use the funds. Also, SBA loans take longer to process than most loans. 

Are you thinking of buying a business? Click here to learn how you should proceed. 

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What Is a Business Broker? How to Hire the Right One

Hire a Business Broker

Here are 7 tips to best choose and hire the right business broker.

7 Tips for hiring a qualified business broker:

1. Rely on referrals and ads

2. Dedicated practitioner

3. Experience

4. Industry knowledge

5. Public reputation

6. Professional connections

7. Likable

The selling and buying of businesses in the United States are more common than you may have thought, with 10,312 businesses changing hands in 2018 alone. 

The reasons people decide to buy or sell businesses are varied. It could be that changes occurred in your life in the last year or that you simply want to take a new direction this year. Whichever the reason, selling or purchasing a decision is among the biggest decisions you’ll ever make.

Whether the outcome of the transaction is a successful one depends on your business broker. But what is a business broker? More importantly, how can you hire the ideal business broker for you?

If you’re asking yourself these questions, you’ve come to the right place. In this article, we tell you all you need to know on how to hire a business broker.

Read on to learn more.

What Is a Business Broker?

A business broker refers to a trained individual or a professional agency whose role is to aid the sale or purchase of a business. Primarily, business brokers help their clients secure the best price for the business. They’re also responsible for submitting the appropriate paperwork and completing the needed permits or licensing.

As you’re going to find out, the whole process of transferring the ownership of a business can be lengthy and complicated. That’s why it helps to use a business broker, especially if you’re the seller.

A business broker can suggest a realistic price value for your business and properly advertise it for sale. They can also screen and interview potential buyers. A seasoned business broker will also help you in properly preparing your business for sale.

If you’re the one considering buying a business, a business broker can help evaluate the businesses you’re considering. They will also get the cash flow statements and financial statements of those businesses so you can make an informed decision. 

A good business broker will also help you secure financing, besides holding negotiations with the seller on your behalf.

Tips for Hiring the Best Business Broker for You

Now that you know when to get a business broker and have seen what such a professional can do for you, it’s time to look at how you can get the best one for you. Read on for practical tips on finding a great business broker. 

Rely on Referrals and Ads 

One of the best ways to find a business broker is through referrals from trusted contacts. Your friends, relatives, or colleagues may be able to recommend a business broker they’ve worked within the past.

You can seek out brokers in the business sections of major newspapers. Narrow down on two or three suitable candidates and interview them.

Choose for a Dedicated Practitioner 

During your interview, find out whether the business broker practices full-time or part-time. A dedicated practitioner can add a lot more value to the sales transaction as they’re likely to have a larger network of contacts. 

Where you’re selling a company worth millions of dollars, it’s best to work with an acquisition or merger intermediaries. 

Ask About Experience  

Industry experience is a great asset in any profession. Inquire how many years your prospective business broker has been in the industry. Sure, everyone starts somewhere, but when you’re engaged in a transaction as sensitive as the sale or purchase of a business, you don’t want to work with a newbie.

But it’s not enough that the broker has been in the industry for years if they’ve only executed a handful of deals. Work with someone who has successfully helped a considerable number of business buyers and sellers seal deals.

Consider Industry Knowledge  

Top business brokers will usually have worked with a variety of businesses. However, most successful brokers develop a liking for particular types of businesses or industries over time. 

Don’t hesitate to ask what particular types of businesses your prospective business broker handles regularly. If you’re looking to buy a SaaS company, working with a broker with industry knowledge on such businesses can lead to a better outcome for you.

Assess Their Public Reputation

If someone recommended the broker to you, it’s a good indicator that you’re going to have a great experience working with the broker. But if you found the broker through an online search or newspaper search, it’s a smart move to learn more about their reputation. 

So, how do you evaluate a broker’s reputation? The first place to start is online. Read online reviews to find out what people say about the broker.

You could also ask for a list of previous clients from the broker during your interview. Follow up with two or three of those clients to what they say about the broker. If past clients generally seem happy with a business broker’s services, it’s a good sign that you, too, will love working with them. 

Inquire Whether They Have Connections  

Besides the business broker, you’ll need other professionals to help you along this journey. These include accountants, attorneys, bankers, and others. Finding a business broker who has connections with such professionals means that you won’t have to spend time and resources finding them on your own.

Of course, not all great brokers network the same way. However, a broker without a professional network tells you a lot about how they do business.

Consider Likeability

You’re not looking for a spouse in your broker, but you’ll be working together for months. The transaction you’re undertaking together is an intense one and involves highly personal matters. That’s why you want to gauge from your initial meeting whether things are going well between the two of you.

If you and your broker do not seem to be getting along well during your interview, it could signal challenges on the road ahead. It’s best to move on to the next potential broker.

Find the Right Business Broker for You

Hopefully, we’ve aptly answered your question, “What is a business broker?” Given how significant this professional will be when you’re buying or selling a business, it’s critical that you hire the right one for you.

Are you interested in the services of a reliable business broker in your area? Get started today.

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8 Things You Need to Know Before Buying a Franchise

Buying a Franchise?

Here are 8 things you need to know before you dive in.

What are the 8 Things You Need to Know Before Diving in Buying a Franchise?

1. Experience

2. Industry

3. Fees

4. Capital

5. Chance of Success

6. FDD - Franchise Disclosure Document

7. Territory

8. Training

Are you thinking of buying a franchise? Well, we don’t blame you! This is one of the most successful business models of the last century, with 785,000 franchise establishments operating around the US today.

One reason for this massive popularity is the array of incentives on offer for budding entrepreneurs. From leveraging the products and influence of established brands to accessing marketing and operational support, you can sidestep many of the usual problems start-ups face in the search for success.

Owning a franchise isn’t all hunky-dory though! What ordinary start-ups lack in experience, authority, and market share, they make up for in flexibility and control over their business. By contrast, franchisees operate under tight regulations dictated by the brand and pay for the privilege of using their brand name.

For these reasons, it’s important to learn more about the pros and cons of owning a franchise before signing any dotted lines. Do you want some help with that endeavor? Keep reading to discover 8 key things to think about before buying a franchise.

1. The Experience

Our first suggestion is to find out as much as you possibly can about the reality of owning a franchise. You could even go and work for one first! You’d learn what it’s like, how they operate, what challenges they face, and how much support they receive.

At the very least, you should research and talk with current franchise owners about their experience. Having this solid grounding in franchise ownership would help in two ways: first, you’d recognize whether or not it’s something you’d enjoy doing; second, you’d glean vital insights into the processes, pitfalls, and perks involved.</p>

2. The Industry

Think about your personal interests, skillsets, and experience levels too. A particular franchise might seem like an amazing business opportunity. But it could turn into a nightmare venture if you dislike the industry and/or have no experience in it.

Good things happen when passion and skillsets align. You’re onto a winner if you can find a franchise in a field you both like and have prior experience in. Take an honest look at your strengths and weakness to decide if the franchise in question ticks those boxes.

3. The Fees

A full understanding of your financial obligations as a franchisee is crucial as well. After all, the initial franchise fee will only be the beginning. You can expect to pay ongoing royalty fees too; some franchisees even have to pay out for marketing, training, and opening day giveaways.

Don’t be caught unawares! Investigate every single cost involved beforehand so you can decide whether or not it’d be a viable business opportunity.

4. The Capital Requirements

Those fees aren’t the only overheads you’ll have to cover as a franchisee though. Like any business, you’ll be buying inventory and paying utility bills, wages, start-up costs, and so on. That’s why it’s important to a) understand how much capital you’ll need in advance and b) have enough of it in the bank to mitigate the financial risks!

Likewise, regardless of the brand in question, it could take some time for your franchise business to be accepted in the community. Make sure you have a sizable financial buffer to weather this initial slow period until the franchise is fully up and running.

5. The Likelihood of Success

Starting a business on a whim rarely ends well. You need to assess the market, identify the demand (and competition), consider potential future obstacles, and, ultimately, determine the likelihood of running a profitable business. Alas, that last part’s often easier said than done for franchises.

Why? Because what works for one franchisee might not work for another!

Success depends on myriad factors, not least of which is an establishment’s location (and both the culture and demand therein). A franchisee’s personal connections make a difference too. Nevertheless, try to work out how many people have had success with a particular franchise, how they accomplished it, and how many failed to try.

6. The Franchise Disclosure Document (FDD)

The FDD is another pivotal piece of the puzzle. This document will tell you everything you need to know about the franchisor and its system- not to mention your potential requirements as the franchisee. Details about territory (more on this coming up), pricing guidelines, products, and various money matters are all included inside.

You must read the FDD cover to cover, understand the terms, and feel happy with the restrictions you’d have to operate under. Avoid signing up for anything that you either don’t understand or have significant reservations about.

7. The Territory

Start researching franchise ownership and it won’t be long before you come across talk of territory. Outlined in the FDD, your ‘territory’ is the area in which you can legally operate and serve customers. It’s imperative that you

1. define your territory clearly

2. choose properly based on size, population density, and setting and

3. avoid or plan for overlap with a competitor’s territory.

Likewise, how many territories, if any, does the franchisor expect to incorporate in the coming weeks, months, and years? How many are in place already? And what are their rules around competing when multiple franchisees operate in the same area?</p>

8. The Training

The best franchisors understand that their success is tied up with the success of their franchisees. As a result, they’ll invest in their learning and be proactive in their development from day one. It goes without saying that these are the organizations you want to buy into.

That’s why you should try to uncover the franchisor’s reputation (and the support they have on offer) before signing any franchise agreement. Inquire about any training opportunities that provide, hands-on assistance they deliver, and so on.

Remember These Factors When Buying a Franchise

Franchising is a hugely popular business model in the US and around the world. And for good reason! It offers a wide range of advantages to everybody involved, allowing entrepreneurs to ‘piggyback’ on the success of established brands.

But that doesn’t mean you should sign any old franchise agreement without thinking it through first! As we’ve seen, this is a big commitment that demands due diligence and insight to ensure you attain the success you deserve. Would you like professional support acquiring a franchise without the fuss of going it alone?

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The Top 5 Loans to Finance Your Business Acquisition

Finance your business acquisition

Here are top 5 loans to learn about

Looking for the right type of loan to finance your business acquisition? There are a lot of options. Read on to learn a few of the best.

Finance your business acquisition

A record $2.5 trillion in mergers was announced in the first half of 2018.

If you are looking to acquire a business, there may not be a better time.

The acquisition gives you access to experts, capital, and market power that can grow your enterprise and build your brand. Yet you may be wondering how you can make it happen.

There are a number of ways to finance your business acquisition. Here are five of the best loan options.

1. Small Business Administration Loans

Small Business Administration (SBA) loans are known for their competitive interest rates and long repayment plans. The SBA does not loan money directly. Instead, they partner with select banks and lenders to secure loans to business owners.

It is easier to get approved for SBA financing if you are an established business rather than a startup. This is because the lender can use your existing repayment history to prove your credibility.

It may take longer to qualify for an SBA loan than other loans. In addition, you will likely be required to provide a down-payment of at least 10%.

Interest rates on SBA loans vary depending upon the current U.S. prime rate. A repayment schedule will vary depending upon the type of business you are purchasing. It is shorter for working capital and longer for real estate.

2. Startup Loans

If you are a new business owner hoping to finance your business acquisition, a startup loan may be best for you. 

These loans may be easier for new business owners to qualify for, but you will still need a solid business plan and a good credit history. One downside of startup loans is that they can restrict cash flow. And don't forget that you could be putting your own credit reputation at risk if the business doesn't work out.

3. Rollover for Business Startups

Rollovers for Business Startups (ROBS) allow you to access the money from your retirement to start a business without paying taxes or early withdrawal fees. The funds can be used for acquisition, working capital, or as a down-payment for other forms of financing.

A ROBS is not a loan, so there will be no debt to repay. It is also quicker to acquire than a typical business loan.

A ROBS usually requires a setup fee and a small monthly management fee. The biggest obvious drawback is that you will risk your retirement funds.

More related posts handpicked for you…

4. Home Equity Line of Credit

A Home Equity Line of Credit (HELOC) is a line of credit secured by the equity you have in your house or apartment. You will likely need at least 20% equity in your home.

A HELOC can be a more inexpensive way to access your credit than other methods because they offer interest-only payments for the first few years of repayment. The downside is that you are risking your home if your investment does not work out.

5. Term Loans

A term loan offers a lump sum that can get repaid in fixed installments for a predetermined period of time. Generally, they are quicker to acquire than an SBA. You may, however, get held personally liable if your business stops making payments.

The Best Way to Finance Your Business Acquisition

The best loans to finance your business acquisition will depend on your experience, credit history, and type of business.

For more information on business acquisition options, read our blog today.

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What Is Entrepreneurship Through Acquisition? Your Guide to the Benefits

What is ETA?

Your guide to the benefits

Have you heard of entrepreneurship through acquisition but are unsure of what this means? Read through here to answer this and to learn why this is a great choice.

Entrepreneurship through acquisition

Many Americans are growing tired of working in corporate America. Here, they are spinning their wheels on a fixed salary and far too many hours. To make matters worse, their wages are barely increasing on a yearly basis.

Fed up, millions are responding to an entrepreneurial spirit and starting their own business. In fact, 27 million Americans are either starting or running a new business.

Pursuing an entrepreneurial opportunity is a wise decision. The profitability rate recently surged more than 25% in a single year.

Read on to learn about entrepreneurship through acquisition. Explore the benefits of acquiring an existing business over starting a new one.

What Are the Challenges of Starting a New Business?

Many entrepreneurs decide to start their own businesses. While some find success, this path is likely to see significant challenges.

The most obvious challenge to overcome is that you are starting from scratch. You do not enjoy the luxury of an existing brand.

There are no loyal customers or equipment to leverage off of. Also, policies and processes have yet to be developed.

You do not have existing employees or subject matter experts. Instead, an employee training program needs to be developed and provided to all new workers.  There may be significant barriers to entry in the marketplace including established competitors.

What Are the Benefits of Entrepreneurship Through Acquisition?

Entrepreneurship through acquisition occurs when buyer(s) purchase an existing business. This includes pursuing franchising opportunities.

In this scenario, an entrepreneur finds a business for sale and pays a price to acquire it. This may come in the form of a lifelong small business owner who is retiring and looking to sell.

There are many benefits to this approach because the transaction may include many different items. For example, you may be acquiring the company’s machinery and supplies. Perhaps the company has popular social media accounts that you will take control of on day one.

Perhaps the greatest benefit is that an existing business has an established revenue stream. You do not have to stress over generating profit as it will be coming in from the start.

How Do Entrepreneurs Find an Existing Business?

Once you decide to forgo starting a new business from scratch, it is time to find an existing business. However, this is easier said than done. Businesses do not typically put up a for-sale sign on the storefront.

The good news is that there are online resources to pair entrepreneurs with business owners looking to sell. There are algorithms that help match your passions with existing businesses and franchise opportunities. Once financing is secured, you can get a business appraised and make an offer.

Glance through featured businesses for sale listed recently on BizNexus Marketplace

Wrapping It Up

The American Dream is alive and well. Now is the time to seize your opportunity and become your own boss.

Instead of working uphill with a brand new business, you should consider purchasing an existing business. This way, you can inherit an established brand and revenue stream.

If you want to learn more about entrepreneurship through acquisition, you can start your search for the next business opportunity by signing up to BizNexus.

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BUSINESS ACQUISITION

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THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

How to Buy an Existing Business: Tips to Find, Value, and Acquire Something Successful

How to buy an existing business?

Tips to find, value, and acquire something successful

Want to acquire something both pre-existing and successful? Read on to learn how to buy an existing business and put it on the path to success.

How to buy an existing business?

Business acquisition is growing increasingly popular in the United States. Take franchising opportunities for example.

In 2020, there are more than 785,000 franchise establishments in the nation. This is the highest figure in the past 14 years.

Interest rates are still hovering near record lows meaning capital is cheap. The cost of money makes buying a new business more appealing than ever before. In addition, the nation’s economy is sitting on a solid foundation with strong consumer demand.

Read on to learn how to buy an existing business. Explore tips on how to find, value, and acquire a successful business investment.

Reasons to Buy an Existing Business

There are many good reasons for entrepreneurs to consider an existing business. For one, there will be a strong supply as Baby Boomers retire and look to sell.

From a business standpoint, you will inherit a proven business model. You can verify that the concept works simply by evaluating prior sales.

In addition, you get to leverage an established brand and product. The business comes with a loyal customer base, employees, inventory, and other assets.

Finding a Business For Sale

The first step in the acquisition process is finding a business for sale. Unlike homes, it is uncommon for a for-sale sign to be placed in front of the business. Existing businesses rarely advertise that they are looking for a seller.

Traditionally, investment bankers facilitate some business transactions. In other cases, accountants or lawyers will share information with prospective entrepreneurs. These professionals often get a heads up as they help plan the existing business owner’s retirement or other financial endeavors.

Another way to find a business for sale is by networking with local owners. However, these methods are old school and often lead to long waiting periods.

Modern entrepreneurs get to take advantage of online tools. There are online resources that use algorithms to pair together businesses looking to sell with entrepreneurs. Here, you can save search criteria like price and favorite businesses that you are interested in.

Your search may lead you to consider franchising opportunities. You can be matched up with a franchise that is in line with your passions.

Business Appraisal

Once the perfect business is found, you need to get an appraisal. In this process, finance professionals pour over the business to determine its value. Your team will review balance sheets, taxes, revenue statements, and more.

This appraisal is a critical step in getting financing to buy your new business. Unless cash resources are available, you can apply for a business acquisition loan. With cash or a pre-approval in hand, you can now make offers on existing businesses. 

A Recap of How to Buy an Existing Business

Acquiring a business is not simple by any means. It takes a lot of research to find the right one. The good news is that there are professionals and platforms out there that can pair you with the best fit.

If you want to learn more about how to buy an existing business, sign up for BizNexus and start getting matched with opportunities today.

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THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

Effect of COVID-19 to Sell Your HVAC Business

A Guest Blog Post By

Patrick Lange

Are you considering selling your HVAC Company in the next 12 to 18 months? This post is meant to help you through understanding the current M&A market amid the Coronavirus pandemic.

Here is what Patrick has to say about the effect of COVID-19 to sell your HVAC business.

Efforts to Sell Your HVAC Business

Unless you have been stuck in an attic replacing ductwork for the last two weeks, you have been overrun with speculation on what is in store next for this fast-spreading virus. Since I do not work for the Center For Disease Control (CDC) or have a crystal ball to tell me what to expect from this Virus, I will leave that to the professionals.

What I want to talk about is what it means for those who are considering selling their heating and air companies in the next 12 to 18 months. As I am sure you have already experienced with your business, there is an apprehension from your customers for letting your technicians in their homes. I have had reports out of the Tampa Florida area of gated communities that will not allow service companies to enter.  As we all know this is not a good time of year to have things slow down, or fall behind. Many companies are just starting to ramp up to perform their maintenance visits, and if they end up a month or two behind on those it can spell disaster for the start of summer. In addition to the increased workload, we all know a service call is more profitable than maintenance, and having techs catching up on maintenance agreements and not running service is a recipe for a bad year.

Thinking of selling or buying a heating and air company, we can help. We specialize in the sale of heating and air businesses.

The Impact on the economy

The federal government has already cut interest rates in an effort to push off a slowdown, but as you know by now, the good times and growth cannot last forever. Just looking at the school shutdowns, sporting events cancelled, and millions of people told to stay home and not go to work, there is going to be a financial impact of this. We have already seen record declines in the stock market which may not be over yet.

This is all happening after many parts of the country, especially the southeast had a mild summer in 2019 and an almost nonexistent winter. Buyers are paying a price based on cash flow, so it only makes sense if cash flow is down, so will sales prices and it could turn what has been a very strong sellers’ market in a buyers’ market quickly.

The good news

As I have said many times over the years in articles just like this, I own, and help others buy and sell heating and air companies because I STRONGLY believe in the industry. If companies are run properly they typically do well in times of slowdown and even during a recession. As other industries are being crushed, people still want cold air in the summer and warm air in the winter and are willing to pay for it. Companies who have strong maintenance programs and quality employees may get behind for a bit, but they will bounce back fairly quickly. That is exactly what buyers are looking for.

I have talked in the past about the push of private equity buyers trying to get into the industry, and times like this are why. Those who have built their companies on a strong foundation, and have a system to train and retain employees are in the driver’s seat to command a premium if they choose to sell.

These can be great times for those who have put in the work, and a drastic wake up call for those who have not. If you have built your business on the reliance of new construction installs and not repeat income of PMA’s, the next 12 to 18 months may be very challenging, especially if you are looking to sell. Hopefully you have the ability to withstand it, and make corrections so the next time it happens you are better prepared.

I pray that your families and loved ones remain safe and healthy during these uncertain times, and if I can help out in any way please let me know. 

More about Patrick Lange

Patrick has been a serial entrepreneur his entire life. He has not only helped others buy and sell businesses with great success, but he has done it himself with his own businesses as well. He specializes in helping those who are looking to buy or sell heating and air and plumbing companies.

Patrick Lange

Certified Business Intermediary who serves business owners in the Florida, Georgia, Alabama, and Texas markets with exit planning, business acquisition & sale.

About Patrick & His Current Listings

Franchise Frenzy! How to Buy a Franchise in 5 Simple Steps

How to buy a franchise?

Here are 5 simple steps

If you're thinking of buying a franchise, there are some things you'll need to know about the process. Read through to learn more!

Buy a franchise

Is owning a franchise one of your dreams? Let us help you make that dream happen by showing you how to buy a franchise in just a few simple steps!

What is a Franchise?

Someone who buys a franchise takes over a store of an already established company such as McDonald's or Edible Arrangements. You aren’t having to start your business from scratch.

You must pay the franchisor a fee upfront, and then pay continuing royalties on your business. They provide you with a trademark, support, and rights to their equipment and products.

Step 1: Consider Your Options

Look for a list of franchise chains to determine which one is best for you. Here are a couple of franchise corporations:

• Soccer Shots

• Checkers Restaurant

• Culvers Restaurant

• Edible Arrangements

• Planet Fitness

• Firehouse Subs

If you are interested in looking at a list of the top 2020 franchise locations, click here.

Step 2: Keep in Mind Qualifications

When buying a franchise, several qualifications must be met. I have made you a list below:

• Have a credit score of at least 680 (check your score here for free.)

• Capital—you will need to place a large fee initially along with other necessary franchise costs.

• Net Worth—You will need your net worth to be higher than your investment.

• Industry Experience—Choose a business you are familiar with. Relevant experience is one thing franchisors look at.

• Experience as a Manager—You must have some type of managerial experience when running a franchise business.

Step 3: Apply for a Franchise

Fill out your chosen franchise’s applications and questionnaire forms! Once you pass the application process, the franchise will send a representative to meet with you to give you a Franchise Disclosure Document (FDD).

This document will detail the company’s fees, rules, financial history, and legal aspects. Legally, you have 14 days to review this 50-page document before you sign any binding agreements with the company.

Step 4: Determine Which Finance Option is Best for You

When it comes to funding your business, here are a couple of options you can choose from that will help you get your franchise started:

• Rollover business startups (ROBS)

• SBA loan

• Bank loan

• Funding from the franchise itself—Some companies offer full or partial financing options.

Step 5: Buy a Franchise Location

You can choose to lease (rent) a property or purchase outright for your business. Most new franchisees opt to lease a property since it is less money up-front. As their business grows, they may choose to buy a location.

When choosing your location whether you lease or buy, you need to consider the following:

• Is your location safe and easily accessible?

• Are there any major competitors to your business nearby?

• Is your building space large enough?

• Is your location in a highly trafficked area?

• Does the location add to your advertisement visibility or subtract?

Final Thoughts

Now that we have discussed some of the ways to make your dream a reality, we must warn you, following your dream is never going to be easy.

Opening a franchise will take a lot of time, effort, and hard work but once you accomplish the goals you set forth, you will find the rewards are worth every ounce you’ve invested. 

Want to learn more about how to buy a franchise? Contact us today to learn more about how we can help. 

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BUSINESS ACQUISITION

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THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

How Could Corona Affect The Sale of Small Businesses?

A Guest Blog Post By

Neal Isaacs, CBI, MBA,

Are you selling your small business? This post is meant to help you focus as a small business owner on what it means to survive the Coronavirus.

At the time of the writing of this article, we are on the precipice of something unprecedented.  The Corona Virus and COVID-19 have paralyzed the US emotionally and economically. It goes without saying that from a humanitarian perspective this event is devastating as people are sick and dying, but I’m a business broker, not a medical professional. This content is only meant to focus on what it means for small businesses and the owners who depend on them.

Most small business owners are just trying to put together a plan for their businesses to survive what happens when the government imposes mandatory closures and the lack of “business as usual.”   But some owners are looking farther into the future. Some were positioning for an exit and some just had offers fall off the table. Let’s explore what this abrupt stagnation could mean for business owners when reviewing this time from the future.

One Time Adjustments:

The important thing to recognize is that we’re all in this together.  Every owner and prospective buyer knows that this is a monumental, once-in-a-lifetime economic event.  Most buyers have pressed pause on acquisitions for now, and there is uncertainty when it will end at this time, but it’s well documented that it started affecting businesses in March of 2020.  

When recasting financials for 2020, most buyers would consider normalizing 2020 by replacing March and similar “Corona infected” months with documented trends from unaffected months.  In other words, an argument could be made that a business that normally produces $100K of revenue each month from January to December, which did $25K in March-June of 2020, should be valued as a business that does $1.2M in a year that didn’t experience a pandemic.  

While the banks may not consider this financial treatment, a pragmatic buyer could.

A must-watch guide on self-isolation during the Conronavirus pandemic.

Abnormal Expenses:

One thing that’s happening for event businesses and many other scheduled service businesses are cancellations.  In these scenarios, business owners are experiencing the double whammy of not only losing the business but paying the credit card processing fees twice; once for the booking and again for the return.  A data set could be prepared to show what typical credit card fees are and highlight those merchant charges that were unnecessarily attributed to the pandemic’s activity. Credit goes to Jeff Snell of Enlign Business Brokers for this insight…

A pragmatic buyer would understand that he or she wouldn’t experience these escalated merchant charges in a normal year.

The general rule of recasting is asking if the next owner of the business would experience similar revenues and expenses if they stepped into the owner’s shoes in the normal course of business.  Because we’re living through the opposite of a normal course of business, so undoubtedly there may be other adjustments in trying to reconcile the effects of the pandemic.

Another example could be the Cost Of Goods Sold for utilized food or similar perishable products purchased going into the week(s) when all businesses shut down. 

The list could go on and on, within reason...

Pivot opportunities

When considering adjustments, however, it goes both ways.  Some entrepreneurs will pivot their businesses and make money from the response to this event.  Medical distributors, for example, could add ventilators and masks to their pipeline and make a lot of money from this episode.

Savvy buyers will dig into the numbers and discern what revenues are COVID-19 specific and which couldn’t be replicated in the long term.  Lack of customer and product concentration are hallmarks of transferable businesses, and owners should move into new markets to fill the gaps but also be mindful of the proportion of the business they are depending on as they grow.

Long Term Outlook

Years from now, we should be able to look back on this time and view it from a long-term perspective.  As painful as it is now, the Corona pandemic episode can become another aberration on the trend curve, no different than previous events like SARS and Swine flu.  Long-term trends matter and time give perspective. If business owners can pull their businesses through this tough period as we make history, they can re-write it for business buyers in the future to illustrate what could have been without Coronavirus, and at the same time reap the benefits of the rebound. 

More about Neal Isaacs

Neil helps entrepreneurs acquire & sell their businesses through his firm VR Business Brokers of the Triangle and writes about the business owner’s journey on his blog at www.RaleighBusinessBroker.com

Neal Isaacs, MBA, CBI is a Business Broker

Certified Business Intermediary who serves business owners in the North Carolina Triangle market with exit planning, business acquisition & sale.

About Neal & His Current Listings

What is the Best Franchise to Own: Tips for Making the Right Choice

What is the Best Franchise to Own?

Tips for Making the Right Choice

Are you thinking about buying a franchise? Are you wondering what is the best franchise to own? Keep reading to find out.

What is the best franchise to own?

Think about how many times per week you frequent a business that is a franchise. Do you stop for coffee at a Starbucks? Get gas and a drink for your commute at 7-ELeven? Get your haircut at a chain like SportClips? Grab lunch at Jersey Mike's or Chipotle? 

If you're already frequenting franchised businesses, why not think about purchasing your own? If you've been contemplating investing in a business but you're not sure what is the best franchise to own, you're in the right place.

Here are the top 4 hottest franchises for 2020. 

1. 7-Eleven

7-Eleven is the number one convenience store and 7-Elevens are going up everywhere! There are over 68,000 7-Elevens around the world, making it popular not only in the US, but in Japan, Thailand, and South Korea as well. 

If you're interested in franchising your own store, you'll have to go through 240 hours of on-the-job training and 24 hours of classroom training. Franchise owners get marketing support with ad templates, regional advertising, social media, SEO and web development, email marketing, and loyalty programs. 

The initial investment varies, based on location, and can range from less than $50,000 to more than $1 million. 

2. Jersey Mike's Subs

Did you know that Jersey Mike's is the fastest-growing sandwich chain in the country? Their plan is to have over 2,000 locations by 2020 and it has recently been named to Entrepreneur's Franchise 500 top 10 lists. 

The initial investment ranges from $237,000 and some change to $760,000+, but these numbers include pretty much everything that you need to get your franchise up and running. 

3. Dunkin'

Even though they dropped "Donuts" from their name, Dunkin' is still one of the best franchises to own. In the 4th quarter of 2018 alone, over 100 new Dunkin' locations were opened around the world, and you can find them in 32 different countries. 

The initial investment ranged considerably, from a low of less than $230,000 to upwards of $1.6 million. Franchisees do receive a lot of support, however, including training, help with site selection and construction, managing and operating the store, and marketing.  

4. The UPS Store

More than 84% of the country lives within 10 miles of a UPS store, making it a franchise easily accessible by nearly everyone. It's also the top franchise in the business services industry and has a 35-year history of franchising. 

If you haven't visited a UPS Store recently, it's more than just shipping packages! They sell packing supplies, have mailbox services, have copying and printing services, and will even take your Amazon return and package them up for return for you.  

The initial investment ranges from a low of around $178,000 to a high of $402,000. 

Want more Franchising 101 Research and Information?

Do your research and get proactive with current franchise owners, ask questions, go out and see possible site locations, and so on. These links will guide your way. Good Luck!

• The International Franchise Association: www.franchise.org

• The Business Resale Network: www.br-network.com

• The Census Bureau: www.census.gov

• The Service Corps of Retired Executives (SCORE): www.score.org

• Franchise Update Publications: www.Franchise-Update.com

• Entrepreneur: www.entrepreneur.com

• Franchise Times: www.franchisetimes.com

What Is the Best Franchise to Own? 4 To Consider

Now that you have an idea of what is the best franchise to own, you can start seriously thinking about investing in your future. If you're still unsure, use our franchise matching tool to see what might fit your budget, your location, and your needs. 

When you're ready to buy, get in touch with us. We can help you with the purchasing process.

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THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

How to Buy a Franchise: 5 Best Practices for Buying a New Franchise Opportunity

How to Buy a Franchise?

5 best practices for buying a new franchise opportunity

There's a lot that goes into investing in a new franchise. If you want to learn how to buy a franchise, check out some of these best practices.

How to buy a franchise

Wondering how to buy a franchise?

Trying to decide if a new franchise opportunity is a good choice for you?

If you're starting a new business, buying a franchise is one of the best options available. It can be less risky than starting completely from scratch.

As opposed to buying an established franchise opportunity, becoming a part of a new franchise can be even better in some ways. However, there are a lot of things you'll need to think about to ensure you're making the right choice.

Below we'll tell you about the 5 best practices for how to buy a franchise.

1. Research the Franchisor Extensively

When you're thinking about buying a new franchise opportunity, it's important that you do plenty of research on the franchisor to make sure they're worth your time, effort, and money.

You should find out everything you can about the franchisor's history and track record as well as the people behind the scenes. You should also find out what you can about the franchisor's financial well-being to ensure that they'll have enough capital to help with your growth.

You should do some digging online to find out more about a franchisor. You may also want to speak to some of the current franchise owners as well.

2. Ask Questions

When thinking about buying a franchise opportunity it's important that you feel open to ask questions. If you have any concerns, bring them up.

You'll want to speak plainly with the franchisor to find out exactly what you can expect from working with them. Ask as many questions as necessary to find out what you can about marketing methods, training tools, technology, operations, and provided support going forward.

3. Be Ready For Legalese

When thinking about joining a franchise, you should also be fully prepared for looking over the franchise disclosure document. You'll want to review it carefully to ensure that you understand exactly what your legal responsibilities and rights are.

If dissecting legal documents isn't your strong suit, you may want to hire a franchise attorney to help you look over it. While it will cost you to hire an attorney, it will be well worth it and can help you avoid big problems later on down the line.

4. Know Your Worth

One of the best practices for buying a new franchise opportunity is to remember that you have value. New franchisors don't hold all the chips and chances are that they need you just as much as you need them.

Because of this, you may have a bit more wiggle room when it comes to negotiating a franchise agreement and getting a deal that is right for you. New franchisors may be willing to work with you a bit more than an established franchise will, as long as they can still maintain the consistency of their franchise brand.

5. Understand Your Market

In addition to knowing everything you can about the franchisor, you also need to think carefully about the market at large.

Look at the trends locally and nationally and be realistic about whether you believe the franchise truly has a place in the marketplace. Look at your community as well as the economy and consider what your community's interests and needs are.

You need to be sure that the franchise you're considering will be appreciated. Don't just rely on wishful thinking or your own personal preferences when deciding to buy a new franchise.

How to Buy a Franchise With These Best Practices

If you're ready to be a business owner, buying a franchise can be a great place to start. However, while learning how to buy a franchise isn't hard, making a profitable choice is much more difficult. It's important that you remember these tips if you want to be confident that you're making the right decision with your purchase.

Ready to get started with buying a franchise? Click here to start looking for a new franchise opportunity now.

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THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

New Franchise Opportunities: Choosing the Right One for You

New Franchise Opportunities

Choosing the right one for you.

With a plethora of advantages to starting a franchise, your only hurdle may be determining which new franchise opportunities to choose from.

New franchise opportunities

In 2017, there were a whopping 745,290 franchises in the United States.

Those with entrepreneurial minds who don't want to go out on a limb and create a completely new business may want to add theirs to the list. And if you're interested in new franchise opportunities, how do you choose which one is right for you?

In this blog post, we'll discuss how to choose the franchise you'll succeed with. Franchises are a better bet for investment due to the fact that they come with a well-known brand. While that's already on your side, your franchise also has a higher rate of success if you pick a franchise that works for you.

Read on for more tips and tricks for choosing the best franchise for you to invest in.

1. Choose a Brand You're Passionate About

You may see that a certain brand of franchises is booming at the moment, but they're selling something you don't really know much about. What's more, you may not even have an interest in what they're selling, but you see the opportunity as a way to make money.

Instead, resist the urge for a high turnover of profits immediately in order to invest in a franchise you have a passion for. You'll succeed in the long run if you're doing something you love, and working with a brand you can stand behind.

2. Buy a Franchise That Has Lots of Support for Its Business Owners

While you should never purchase a franchise not knowing anything about business, you should have a strong support system from corporate. Discuss whether they have a strong backing for their franchisees, and how much support they actually give them.

Don't go for a franchise that leaves business owners flailing and wondering what to do next without the hope of help.

3. Pick a Franchise with a Good Reputation Among Franchisees

When looking for your next business opportunity, you may have been crushed to find out that your favorite chain restaurant doesn't work well with franchisees. Or, you may have found out that they've had incidents in the past and many unhappy business owners.

Don't then decide to franchise with them because you're loyal to the brand. While you can still remain a consumer of the brand, you'll want to ensure that corporate works well with people like yourself.

4. Choose an Affordable Investment

Depending on which franchise you buy into, you'll have to choose a franchise opportunity that doesn't blow through your budget. As a business owner, you don't want to spend everything you've got on the franchise fee. You'll need to take this on board when choosing the right brand to work with.

Taking Advantage of New Franchise Opportunities

Opening up a franchise is a big decision, but it can be incredibly exciting, and you'll want as much information as possible when you're just beginning. Here are 8 things you should know before buying a franchise.

Check out BizNexus Blog, which is all about new franchise opportunities to help you make the leap from searching for an opportunity to being a business owner.

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Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

5 Reasons Why Buying an Existing Business is Better Than Starting One

Do You Want To Buy an Existing Business?

5 Reasons Why It is Better Than Starting One

There are a few reasons why buying an existing business is better than starting one. Use these tips to choose what's best for you.

Purchasing an existing business is one of the best entrepreneurship opportunities available for you to build wealth.

It already has employees who understand how to run the business. Also, your employees are everything because they're the ones that keep your business afloat.

Simply put, your risk isn't as great when you opt to buy an existing franchise as opposed to building a business from the ground up.

Take heed to these tips so that you're able to build your business portfolio.

Branding is everything, and franchise opportunities are ripe for the picking today.

You can grow your wealth by buying an existing business, and it may have advantages that are greater than you'll enjoy by starting from scratch. If you're thinking about buying a company and want to know the benefits, consider the points below. 

1. You're Taking Over a Company That Already Has Cashflow 

Purchasing an existing business is one of the best entrepreneurship opportunities available for you to build wealth. 

Generating income is always a process, and it can take years for a brand new company to become profitable. By stepping in and getting cash flow on the front end, you can strategize on how to grow the company, rather than just trying to how to make it survive. 

2. Getting Your Hands on Financing is Much Easier

Lenders don't like risk. 

When you buy a company that is already established, you dramatically reduce risk, and this makes you more attractive to financial institutions. You'll be able to get a loan with interest rate terms that are fair and affordable. 

3. You Don't Have to Get it off the Ground to Begin Bringing in Income

When you're just launching a business, you'll have to spend a great deal of money on equipment, licenses, permits, branding, legal fees, and so much more. 

Since you don't have to handle these sorts of expenditures, it frees up more money than you can re-invest into the business. This way you're focused on growth, rather than just trying to break even. 

4. The Core Customers are Already in Place

You'll also have established customers to serve and market to when you buy a franchise. 

It's much easier to expand on an established base that you have data on than trying to start from scratch. You're doing business with people that already trust your track record and understand the brand. 

You'll also inherit all of the trademarks that the company has in place, along with all of the brand equity that comes with it. 

5. It Already Has Employees Who Understand How to Run the Business

Your employees are everything because they're the ones that keep your business afloat. 

When you buy a franchise, you're also getting access to employees that are used to running the business on a day-to-day basis, and they understand the policies. It's easier to add your own influence and add new policies, rather than building from the ground up. 

Simply put, your risk isn't as great when you opt to buy an existing franchise as opposed to building a business from the ground up. This lets you begin generating money on your terms. 

Consider These Points When Buying an Existing Business

So there you have it. Buying a business can help you out in so many ways. Take heed to these tips so that you're able to build your business portfolio. 

Consider these tips when buying an existing business, and don't hesitate to check out more of our posts on taking advantage of franchise opportunities. 

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BUSINESS ACQUISITION

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THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

11 Critical Things to Grasp Before Purchasing a Franchise

Buy a Franchise?

Must know 11 vital points before you purchase a franchise

When you own a franchise, you can get into business for yourself and not by yourself. An owner of a franchise will operate by selling services or products that are established and those that have significant brand recognition.  Apart from the trademark, service, and product, a franchise also comprises a complete method of conducting the business-like operation manuals and marketing plan. Managing a franchise will increase the chances of being successful in your business since you will be leveraging a business model that is proven and benefits from the available customer base that can take years to grow using your idea.

Most people are known to make the mistake of thinking that franchises are a small business in a box and they do falsely believe that most of the franchises do have a much lower failure rate when compared to other types of companies which is never right. Just like the different types of businesses, up to 60% of franchises will most likely be out of business in the next two years.

Hence, if you do not have plans for purchasing a franchise, you will have to prepare yourself. While such business types are known to offer one with everything that you need to get started together with training yourself and your team, running them has never been easy.  You will have to obtain the right amount of cash reserve to get started, especially when you want to venture into the food franchise. For instance, you will need to have up to 2 million in liquidity for you to apply in becoming a franchisee of any significant food franchise like Qdoba Grill or McDonald’s. The majority of the franchises will be required to give a specific amount to help in the advertisement.

 Things to Consider Before Purchasing a Franchise

Putting aside some of the risks, purchasing a franchise can be an excellent way of owning your own business and enjoying all the perks that come with it. Provided you do it in a smart and calculated way. 

 1.      Ensure You Do Thorough Homework

You will have to educate yourself. It is essential that you know about the business and industry you want to get. Take your time and interview the franchisor thoroughly. In most cases, they will always introduce you to the individuals who will be of help when you want to sell a business.   Feel free to ask questions concerning the pre-opening support, construction, design, training, financing, site selection, license boundaries, and grand opening program.

 2.      Assess your strength and Style of Work

You need to ask yourself how you feel when you carry out the same task every time.  Are you on good terms with other people? What’s your feeling when you perform business-to-business sales?  If you have a negative attitude towards purchases, you will always have trouble managing any business. However, if you are not on good terms with other people, you will always require a partner to help you handle the business side. Ensure you are still honest with yourself concerning your weaknesses and strengths.  Choose approximately three individuals whom you trust and ask them about your weaknesses and strengths. It is advisable that you go for a business which you have some experience. Never buy a business franchise just because you like eating. Purchase a restaurant because you do have lots of experience in the management and servicing of food.

 3.      Check the Fees

Apart from the initial franchise fee, most franchise opportunities will always be forced to pay for advertising and royalties fees.  We also have the opening day expenses which occur when the headquarters need you to give away the free stuff and carry out special promotions. 

It is vital that Franchisees be very careful to balance the restrictions/ requirements with their capability of managing a business.  Having a system-wide scandal can make your franchise fail to perform well.

 4.      Search for the Dirt

Consider taking advantage of sites like Sean Kelly’s Unhappy Franchise and look for the negatives about the franchise you are about to buy. For instance, Kelly did run exposes on NY Bagel Cafe by listing down the high closure rate of the stores.

However, one store consultant Richard Taggert does disagree with a report by Kelly and instead says that the company only had some small closings in the past decade.

 5.      Ensure You Immediately Get Your Money

Starting a franchise and running it does involve vast sums of money, including the equipment cost and buy-in fee, fit-up construction and the location of the retail businesses, and upfront market costs.

You will require a minimum of one year operating with the capital before the business picks up not to mention the monies you will have used to help in building up the business. Even some of the most popular brands like Dunking required some time to pick on a new location.

 6.      Ensure you carefully read through the FDD Disclosure statement

The FDD, Franchise Disclosure Document refers to a document that offers information concerning the franchise system and the franchisor to the requirements of the franchise. No franchise is independent. Most franchisees are known to operate their businesses about the restrictions and procedures that have been set in the franchise agreement.  The limits do comprise of services and products offered the geographical boundary and pricing. The agreement also makes requirements on the total amount of working capital the franchise will require. The Franchise Disclosure Document is considered to be one of the most barriers for many people to becoming a franchise as they have no control over the person that can buy a franchise in their region.

 7.      Make use of the Franchise Lawyer

Not all business lawyers are in a position of negotiating a franchise agreement. You will require a professional. The Franchise license agreement refers to a contract that helps in describing the relationship between the franchisee and the franchisor, including the use of fees, trademarks, control, and support.

It is a written legal contract between the franchisee and the franchisor that informs each part on what they are required to do.

 8.      Keep Your Eyes on Franchise Consultants

The majority of the franchise consultants are known to be paid sale individuals for franchise owners. The consultants will always put on a tough sell to ensure you get signed to a franchise deal as fast as possible. It is because they will still receive some commission from the initial franchise fee. Always ask them to make their agreements clear before you sign so that they do not lie to you.

 9.      Franchise Work

It is essential that you always learn by doing. Before you sell a start-up or get into any business or purchase a franchise, it is crucial that you first consider working for one or search fund. After you have become an employee, you can see how things are working out for you and the amount of support you are getting from the franchisor. It can be compared to being an undercover boss, and it can quickly provide you with some valuable information. You need to work for a minimum of six months to get a real impression of how things work.

 10.  Seek Professional Support

As it had already been mentioned in hiring a franchise lawyer, it is also essential that you get an accountant to help you in running the numbers. You will always require a detailed analysis to help you understand what your cash outlays in a month.  Getting seasoned insurance can also be of great help.

 11.  Contact Other Franchisees

It is advisable that you reach out to other franchisees to help hear their story and see what pros and cons the business will encounter. One of the most important questions you will have to ask any franchise owner is the amount of support they will be able to get from the headquarters. You will also be interested in asking them if they will invest in the business again. It is vital that you target at least 12 franchises since most of the small business owners are very proud of them and will never admit if they did struggle financially.

Depending on the type of entrepreneurship through acquisition you go for, you will always invest between $150,000 and $1 million before you even start your business. Always do yourself a favor by trying to get any franchises that are not happy online before you commit yourself to any franchise agreement.

It is also essential for you to know if there is any discord on your franchisor. Always take advantage of the regional and national advertisement, training, operational assistance, operating procedures, management support, ongoing supervision, and access to bulk buying. Another valuable resource you will need to check before purchasing any franchise is the international Franchising Association guide.

Despite running a franchise being an excellent idea to help start your business, it is crucial you understand what you are about to get into, whom you are about to start it with, and your plans on how you will ensure it is successful.

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Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

How to Buy a New Franchise When You Want to Own a Business

Want to Own a Business

Buy a Franchise

You don't have to struggle to buy a new franchise. You can use this guide to choose and purchase the best franchise for you. If you're trying to buy a new franchise, you'll need to seriously do some homework; it starts by doing your preliminary research into it to see if it's a viable option. Checking into the best location for a business is a necessity, especially if you are opening a franchise.

Buy a New Franchise on Your Terms

The potential for growth is abundant since you're getting the keys to a business that already has an established brand to piggyback on. However, you'll need to make sure you're handling this franchise purchase with some intact strategy. 

Consider these points so you handle the deal accordingly. 

1. Thoroughly Research the Franchise and Its Viability

If you're trying to buy a new franchise, it starts by doing your preliminary research into it to see if it's a viable option. 

Since your individual franchise is a micro success of the larger company, you'll need to research the brand as a whole. Pre-screen the franchise and figure out how lucrative this purchase can be, and how much you should be paying for the opportunity. 

2. Scope Out the Best Location

Checking into the best location for a business is a necessity, especially if you are opening a franchise. 

You'll want to open the franchise in a thriving city with room for growth, while also choosing a location that is in a neighborhood or district that gets plenty of traffic. In addition to researching the demographics of different locations, check with the local Chamber of Commerce for more resources and advice. 

3. Be Sure You Pass the Prerequisite Requirements

Buying a franchise requires you to apply with the company selling it. This means understanding their prerequisite requirements, such as credit score, business plan, net worth, and business experience. 

Having these details in line upfront will help you keep your application on track. 

4. Hire a Legal Team to Assist With Negotiation and Preliminary Paperwork

You owe it to yourself to put together a team of pros that can assist you with securing the business. Start with talking to some accountants and lawyers. 

A business lawyer can cost you about $150 per hour and will be worth it when it comes to negotiating and handling preliminary matters. 

This way, you'll have resources at your disposal to make sure your application is handled properly and will comb through your finances to ensure that you're making the best decision. 

5. Handle the Application, Understand the Agreement and Get Financing

Finally, take your time and go through the process of filling out your application. 

As your application rolls along, start to keep copies of everything from purchase agreements to rezoning permits. You'll also need to reach out to finance companies that can help you with a loan when you need it. That way you're able to complete the purchase of the franchise as soon as the application is approved. 

Buy a New Franchise on Your Terms

If you are trying to buy a new franchise, these are the five tips that you'll need to bear in mind. This can be a lucrative enterprise that helps you round out your portfolio with a strong earner. 

Check out this guide for buying a new franchise and don't hesitate to reach out to us for further help. 

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How to Buy a Business: Best Practices for Buying a New Franchise Opportunity

How to Buy a Franchise

Best practice guide

How to buy a franchise business: Are you interested in buying into a franchise? With the system and procedures, it seems challenging. Business owners prefer franchising because you are inheriting an established brand. Moreover, a franchise has a proven business model. Like any business, it is important to select a franchise that you are passionate about.

Franchise opportunities under consideration should mesh with your past business experience and acquired skills. It is not cheap to buy a franchise and significant capital is required. This leaves prospective franchise owners searching for financing options. Buying a franchise is not particularly easy and sometimes professional assistance is required. Business owners are able to quickly leverage off the franchise's brand and product line.

Here is how to buy a franchise:

Franchising remains a great business opportunity in 2019. In fact, there are nearly 760,000 franchise establishments in the United States.

Business owners prefer franchising because you are inheriting an established brand. Moreover, a franchise has a proven business model. You can review actual sales and profit data to verify that the concept is growing rapidly.

Read on to learn how to buy a business. Explore this comprehensive guide on buying franchises including topics such as financing, research, and getting a good deal.

Find a Franchise Opportunity You Are Passionate About

The first step in buying a franchise is identifying the right opportunity. Like any business, it is important to select a franchise that you are passionate about.

Start off by considering industries that you are familiar with and understand how they operate. Also, franchise opportunities under consideration should mesh with your past business experience and acquired skills.

Franchise Analysis

Before you invest in a franchise, substantial analysis is required. Of course, you want to look at sales data and what profit margin is realized. There are many other business indicators to evaluate.

What are the startup costs and franchise fee? What type of operating expenses does the franchise have? Are there any additional fees such as royalties or advertising costs?

This all falls into the category of performing a comprehensive cost-benefit analysis. There are other factors to consider in a franchise analysis.

Perhaps one of the most important factors is the location of your prospective franchise. This is so critical because not all locations are considered equal.

Each geographic location comes with its own set of state and local taxes. There are also state wage laws to consider, as well as rent and population density.

Financing Options

It is not cheap to buy a franchise and significant capital is required. On average, initial franchise fees range from $20,000 to $35,000. Depending on the brand, it could cost upwards of $100,000.

Not many entrepreneurs have that type of cash lying around. This leaves prospective franchise owners searching for financing options.

Some opt to apply for a bank or Small Business Administration (SBA) loan. Others use their retirement savings using a mechanism called a rollover for business startups (ROBS).

ROBS allows you to withdraw retirement savings from your 401k, IRA, etc. without penalties or taxes. Lastly, some franchisor offer financing options.

Professional Assistance

At this point, you may be feeling overwhelmed. Buying a franchise is not particularly easy and sometimes professional assistance is required.

There are subject matter experts available for franchising placement and finding the right opportunities. They perform in-depth analysis such as reviewing the franchise’s financial health. Among many other services, they also evaluate the Financial Disclosure Document (FDD) and Franchise Agreement.

A Recap of How to Buy a Business

There are many reasons why entrepreneurs choose to buy a franchise. Business owners are able to quickly leverage off the franchise’s brand and product line.

However, the franchise acquisition process is littered with landmines and complexities. A professional service company can ensure that you make a sound investment. If you want to learn more about how to buy a business, log in today.

Financing the Purchase of an Existing Business: Different Financing Methods to Know

Buy A Business Through Financing

Have A Look At Different Financing Methods

Do you want to purchase a business but don't have the money for business acquisition? Here's all about financing the purchase of an existing business. As such, you'll need to learn the ins and outs of financing the purchase of an existing business on your terms. If you are looking into buying a business on your terms, you'll need to explore all options in front of you. If you have been building your retirement money over the years, this can be a great outlet for acquiring a business. Financing the purchase of an existing business is a strategic move that you need to carefully consider.

It's important that you take the proper steps when you are looking to acquire a business. 

As such, you'll need to learn the ins and outs of financing the purchase of an existing business on your terms. Thankfully, there are lots of ways you can go about it. 

Follow these tips to see which form of financing suits you. 

1. Ramp Up Your Own Funds to Allocate

When someone is looking to sell a business, there are countless arrangements that come into play. 

The best thing you can do for yourself is to put up your own money if you have it. This way, you call the shots and aren't worrying about crazy interest rates or strict terms. 

It's always best to have a nest egg set aside, and you can use this nest egg to your benefit when you decide to allocate some of your own money to acquire a business. 

2. Find a Traditional Bank Loan

If you are looking into buying a business on your terms, you'll need to explore all options in front of you. 

Getting a traditional bank loan is still an incredible option. Reach out to either a big bank, community bank or credit union to see what sort of loan options you can explore. 

Make sure that they are feasible for your budget and that the terms are beneficial to your needs. 

3. Talk to the Small Business Association

Be sure that you look into the Small Business Association (SBA) as an outlet when you'd like to get some lending. 

These organizations are allies for small businesses such as your own and can help you get your hands on the funding that makes the most sense.

They'll give you access to the financing options that are most conducive to growth so that you are able to expand your business.

4. Use Your 401k to Roll Money Over

You can use your 401k as a tool to fund a business. 

If you have been building your retirement money over the years, this can be a great outlet for acquiring a business. The benefit of using a 401k is that you'll be able to do so without the same early withdrawal penalties that you would experience when taking the money out for other reasons. 

5. Get Financing Through the Seller

Finally, it also pays to seek financing from the seller. 

A number of sellers will offer you ongoing financing at a great rate, which can expedite the sale of the business. Be sure to thoroughly read through the terms to know what you are getting. 

Financing the Purchase of an Existing Business: Use These Tips

Financing the purchase of an existing business is a strategic move that you need to carefully consider. If you're in the market for buying a new business, let these tips guide you. 

Our company can help you out so that you can find the assistance that you need. 

For more information on buying a business on your terms, stay tuned and get in touch with us for more help. 

How to choose the right business broker to help you buy a new business in 2019

Top Guide On How To Find a Great Business Broker in 2019

Find Your Soulmate Business Broker

A business broker is typically working with multiple buyers and sellers of businesses at any given time, and communication can slip through the cracks if you’re not linked up with a proactive, smart and organized intermediary. Buying or selling a business can be a very long, tough process, and having the right business broker at your side to offer guidance and insight into market conditions, negotiations, and buyer and seller options can be a game-changing solution if you can find the right fit.

Find a business broker to help buy a business

An often overlooked option to help begin the journey towards buying your own business is to simply reach out to a business broker for guidance before you begin your search. If you can identify a quality business broker this can be a way to help jump-start your search and increase the chances of finding a successful acquisition. Brokers typically represent multiple deals within their category of expertise simultaneously, and if you’re able to establish a relationship with a productive broker you gain access to a continuous stream of deal-flow. The trick is to identify that standout broker.. The one who’s knowledgeable, productive, and won’t waste your time pitching you sub-par, low probability deals for sale.

Speak directly with recent references.

Don’t even bother with a business broker if you can’t verify if they’ve historically done well by their clients on both the “buy” and “sell” sides of the transaction. Ask to speak with owners of businesses the professional recently helped buy or sell, and check for relevant reviews online. If you’re researching the professional’s profile online on his or her company site, LinkedIn, or Biznexus definitely prioritize DEAL experience over education, listed skills, or any other potentially biased information manufactured by the professional him or herself.

Make sure the professional keeps working for you

Set communication expectations from the outset. A business broker is typically working with multiple buyers and sellers of businesses at one time, and communication can slip through the cracks. Set up a recurring weekly, or monthly meeting with the broker to review his or her listed deals. Even better, as you develop your relationship with the broker over the course of regular calls you position yourself in the front of the line to hear about the deals the broker may be working on, but hasn’t officially listed… Getting first crack at an unlisted deal is a great way to get a head-start on developing a relationship with the seller, and to potentially avoid a bidding war with competing buyers if you can negotiate terms before the competition gets wind.

Buying a business can be a very long, tough process, and having the right business broker there to help feed you potential deals, offer guidance and insight into market conditions can be a great help. Do your homework before you choose any professional to help you with the process, and make sure you’re clear on expectations and compensation from the outset. Standard shameless plug: We recommend you check the BizNexus directory before making contact with a potential business broker for any helpful reviews, ratings or content that could provide guidance.

A few useful links if you’d like to dig deeper on the topic:

1. What you Should Know About Working with a Business Broker. -Inc.

2. How to Find a Business Broker. -Entrepreneur