ENTREPRENEURSHIP THROUGH ACQUISITION
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How to Buy an Existing Business: Tips to Find, Value, and Acquire Something Successful
Want to acquire something both pre-existing and successful? Click here to learn how to buy an existing business and put it on the path to success.
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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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.
Buying vs Starting a Business: Which is the Better Option?
If you decide that starting a business is not the route you want to take, the better alternative is buying an already established business.
Buying vs Starting a Business
Which is the Better Option?
Wondering whether to buy an existing business or start a new one? Read through to learn why the former is the superior alternative.
Buying vs starting a business
Are you wanting to own a business but don’t know where to begin? So many questions and options such as, “what should my business be?” or “should I buy a business or start one?”
These are all good questions! Let us help show you why buying vs starting a business is really the better option!
Starting a Business
While starting a business can seem like an enchanting idea, it poses several major disadvantages as opposed to buying one.
When you start a business, you must build it from the ground up. Starting from scratch is definitely not for the faint of heart. Here is a list of just a few of the difficulties you will face if you start a business from scratch:
Creating and keeping your customer base
Acquiring a patent if it’s for a product or novel idea
Hiring employees
Marketing your business
A large amount of capital is available
Not having an established reputation
Starting a business is very risky. Statistics show that about 2 out of 10 start-ups will fail.
When you are starting a business, you have to create your own value for your product or company, whereas part of buying a business that is already established includes purchasing their already established value.
Buying a Business
If you decide that starting a business is not the route you want to take, the better alternative is buying an already established business. Here are several advantages to buying a business:
Known brand—having a known or popular identity
Existing infrastructure
Employees who are trained
vendors who are already established
Existing funds
The business model that is proven and established
Existing customer base
Check out this video if you are looking to buy a website, eCommerce, an app, or SaaS Company
Buying vs Starting a Business
When buying a business you have a proven business model because customers are familiar with the business or product and are purchasing already. They have established customers.
Starting a business requires you to produce a proven business model as if it were a hypothesis. “My customer wants my product because of ABC.” This is what you are trying to prove.
Buying a business means you have trained employees meaning you can start immediately generating sales because you don’t have to waste your time on the training and hiring process.
These already trained employees will help your business to run smoother with their expertise and prior experience.
Starting a business means wading through piles of applications and interviews and then taking the time to train each of the employees you hire. You also will have to factor in a learning curve and be prepared to have a slow start when it comes to generating sales.
One Final Thought
When considering buying vs starting a business, if you really have your heart set on starting and developing your own, we suggest you first buy an established one to get a feel for how a business is run.
Once you have bought a business and have taken a few years to turn a profit and understand the nitty-gritty of the business world, then maybe consider starting your own.
While starting a business can at first seem inspirational or enchanting, we promise you will soon become disenchanted. When that untrained employee sets the kitchen towel on fire, you will think back to this post and wish you had instead bought your business.
Want to learn more about owning your own successful business? Contact us today to see how we can help.
BizNexus -Learn More From Our YouTube Playlist:
BUSINESS ACQUISITION
Have you checked out our podcast?
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.
5 Tips on Financing the Purchase of an Existing Business
There are a number of methods you can use when financing the purchase of an existing business. Here are a few that we suggest you try.
Purchasing an Existing Business?
Here are 5 tips to help you finance the acquisition
There are a number of methods you can use when financing the purchase of an existing business. Here are a few that we suggest you try.
Financing the purchase of an existing business
More businesses are being sold than ever before. In fact, a record number of small business owners are selling their companies. According to this data, the number of business listings increased by 8 percent from the prior quarter.
In a world awash with excess capital and with demand for reliable cash flow returns on the rise, prices for existing businesses & assets have been on the rise.
Popular acquisition targets typically have reliable, recurring revenue and cash flow, with an established brand and loyal customer base. With prices continuing to trend up, you’ll need to have your ducks in a row before you decide on the best way to finance an acquisition.
Read on for a guide to financing the purchase of an existing business. Explore 5 tips for purchasing a business that is highly effective.
1. Apply for an SBA Loan
The United States Small Business Administration (SBA) is a great resource for entrepreneurs. They work with lenders across the nation to guarantee loans against default.
Lenders are willing to take on more financial risk due to the government’s backing. SBA loans offer more favorable terms and rates than conventional funding sources.
There are a number of different loan programs to apply for. The most popular are the 7(a), 504, and microloan programs.
2. Consider Seller Financing
In some deals, the seller is willing to finance a portion or all of the deal. The benefit to the seller is that they can turn a greater profit.
There are also a number of advantages to the buyer. Perhaps most important is the ease of access to capital.
Also, another benefit is the speed of the financing deal. Seller financing is proven to be a faster alternative than conventional loans.
3. Make a Sizable Down Payment
A significant down payment is an effective method for reducing company risk. Like purchasing any asset, a down payment improves your financial position in the company. It reduces the amount of interest that you will pay over the life of the loan.
For business acquisitions, a large down payment is required. While mortgages require 20 percent, a business purchase usually takes even more.
The more cash you bring to the table the better. Many small business owners use personal funds for a down payment. For larger acquisitions, the down payment may require multiple investors pooling their resources together.
4. Angel Investors
There are increasingly common scenarios today where wealthy investors, feeling flush after 10 years of public market gains and looking to diversify into something reliable & attractive going forward, are interested in financing entrepreneurship through acquisition (ETA) as a viable investment vehicle. If you can sell those types of investors on your personal “why” story and your credentials to run a business, this can be a great option if you can get access.
5. Getting Creative
To finalize a business purchase, sometimes you have to get creative. These cases may call for a leveraged buyout or assumption of debt.
In a leveraged buyout, you trade-off existing assets in lieu of capital. An assumption of debt means that you are acquiring the company’s liabilities as well as their assets.
A Recap of Financing the Purchase of an Existing Business
Starting a business from scratch is hard work and risky. Many entrepreneurs choose to purchase an existing business instead and fund their entrepreneurial efforts from the existing cash flows of an operational business.
This option allows an entrepreneur to acquire a proven business model. Entrepreneurs turn to methods like SBA or seller financing to close a deal. If you want to learn more about financing the purchase of an existing business, Login to get matched.
BizNexus -Learn More From Our YouTube Playlist:
BUSINESS ACQUISITION
Have you checked out our podcast?
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
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.
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.
BizNexus -Learn More From Our YouTube Playlist:
BUSINESS ACQUISITION
Have you checked out our podcast?
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 Business: Best Practices for Buying a New Franchise Opportunity
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.
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.
How to Buy or Acquire an E-Commerce Website for Sale
In this guide, we are focusing on how to buy an e-commerce website business that’s for sale. We will go through the entire process so that you can make the most out of the purchase and set yourself up for success.
How to Buy a Digital Business?
E-Commerce Website for Sale
Buy an E-Commerce Website for Sale
Want to own and run your own online digital business? You basically have two options:
Establish a new company and start from scratch.
Skip the startup cluster consider acquiring an existing e-commerce website business already on a clear upward trajectory, and apply your creative entrepreneurial pivots and experiments while enjoying the benefits of “cash flow” (something startups were expected to think about prior way back in the dark ages of the early 21st century).
In this guide, we are focusing on how to buy an e-commerce website business that’s for sale. We will go through the entire process so that you can make the most out of the purchase and set yourself up for success.
What Type of Business Do You Want and Can You Buy?
If you are planning to buy an e-commerce business, it is important to sit down and think about two things – your lifestyle goals and financial needs. Your goal here is to analyze your current situation and try to stay true to your budget, day to day operational involvement interests, and values, -all keys to successful entrepreneurship over the long-term.
What Are Your Future Objectives?
You should never stop dreaming big, but when it comes to setting the objectives, it is important that they remain realistic. Ask yourself, why are you buying an e-commerce business? This will help you to stay focused with realistic objectives that will shape up your business model.
If you are a beginner, you may be purchasing a company to learn all the tricks of the trade before you engage in starting a business from scratch. In this case, you may want a helpful and experienced e-commerce entrepreneur that wants to sell their e-commerce website who is willing to share essential details about how they made the e-commerce venture that you are consider buying into a profitable business.
You may also think that you have the necessary resources and skills, which is why you want to save time and buy a company that has already positioned itself in the market. This way, you can invest improving resources, and scale the business to the next level.
It is also vital to consider how much time you can dedicate to the business that you are buying. If you plan for this to be your full-time job, that’s great. But if you consider e-commerce business as an additional income, it is important that it won’t take you more than a couple of hours in a day to operate the e-commerce website.
What is Your Passion Aligned with Your Skills?
When choosing the market in which you will purchase an e-commerce business, it is vital to consider two areas – your passions and skills.
We all have our favorite market segments within an industry – some of us are crazy about clothes, others are health freaks that care about staying in shape, or you may be into tech products and gadgets. It would be great if you could buy a business in one of the market niches that you are passionate about. This way operating the e-commerce business won’t be merely a job, but it is aligned with your passion as well.
It is also important to consider your knowledge and skills. If you have graduated from an art university, you may consider selling homemade art or crafts and other related products.
It can also be very helpful if you have tech-related knowledge. Knowing more about website optimization and SEO can help you with search engine page ranking. Being a good writer can be of great importance in preparing unique content to promote brand awareness and increase conversion rates.
The crucial thing is to ensure that you have the right skill set to run the business. If it's necessary, consider hiring someone else but make sure that you can incorporate that expense into your budget.
Think About the Resources You Have
Yes, you need to consider financial capital, which means that you should have enough money to purchase and invest in the business to take it to the next level.
But we are also talking about other resources. You need to ensure you have enough time to run the business, a computer or laptop you will use for administration, etc. You can also use your current social media accounts if you are popular on Facebook or Instagram.
How to Determine the Price for an Ecommerce Business
It varies from one e-commerce website business to another, and ultimately depends on your estimation and business valuation, but the general rule says that an e-commerce website business can be valued anywhere from 10 to 24 times its monthly profit. In other words, if you have a business that secures $3,000 per month, you will need at least $30,000 to purchase it. The price may vary depending on the potential of that e-commerce business’ ability to increase profit.
The main idea is to buy a business that is profitable and can remain profitable as this should be your primary goal when running e-commerce business. The estimated monthly earnings should be high enough to motivate you to work on growing the company.
Here is more about how to evaluate the worth of an ecommerce business
Naturally, business owners wouldn't want to sell their business for less than its worth. There are a number of valuation methodologies you can use to determine the fair value of a business. Let's take a look at what it takes to fairly evaluate an e-commerce business for its worth.
There are a few ways you can determine the value of an e-commerce business.
Multiple of Seller Discretionary Earnings. You might evaluate a business's worth by looking at their historical earnings. When favorable factors are agreed on, the businesses expected worth will be higher during the valuation.
Discounted Cash Flow (DCF) Analysis isn't the primary way to evaluate the worth of an e-commerce business, but it is a useful analysis.
Online business sales fluctuate more widely than those of traditional businesses, which make this analysis less suitable for e-commerce. These can include a company's size, years in business, yearly revenue, and so on.
A company with an active customer base and positive market outlook will be worth more than a company without active customers or a profitable niche.
Evaluating the worth of a company doesn't come easy, however, it's a necessary step you must take before finalizing a sale.
Where to Find an E-commerce Website Business to Purchase
Once you have the required capital, the preferred market niche, and other desired variables, it is time to look online and find an e-commerce business to buy. The good news is that there are numerous marketplaces where you can buy and sell e-commerce websites.
However, we advise you to stick to the reliable ones, such as:
Shopify Exchange – exclusively designed for Shopify stores, and an excellent place to find a website fast. The great thing about this website is that it is free, and there is no success fees or other charges.
Flippa – you can choose between thousands of different business, which means you have a vast range of websites to pick from when buying.
Empire Flippers – it is interesting to note that every website put up for sale passes through the screening process of the administrators.
BizNexus - Inventory of online businesses for sale 100% vetted by expert online brokers from all around the world. Sellers are prohibited from posting directly on the site so there is a built-in level of vetting required as every listing on the site is a business that a broker see’s as sellable, and that a broker has initially vetted themselves.
How to Be Sure You Made the Right Decision
You’ve found e-commerce business that seems like an attractive purchase, but you are not 100% sure that you made the right choice. If you want to be certain in your decision, just follow these steps.
Don’t Hesitate to Ask Questions to the Seller
The chances are that the seller has listed some basic information about the website and themselves, but it is always wise to ask for more details. Start by trusting yourself and conducting online research on the owner and the business.
See if the seller has LinkedIn or other social media profiles, and ensure that they are a real person, and not someone hiding behind a fake identity. Do an online search for the business, too, as it may encounter user reviews and other valuable information.
Here are some other questions to ask the seller:
How long has the business been running – the longer the better and bigger chances for success. Businesses with longer operation period provides a lot more data for making an informed decision.
Why they are selling the business –look for an authentic reason. Perhaps they bought another company, or they got a better job. Maybe they are moving to another country. Whatever the reason, you need to make sure that they are telling the truth.
Tell me more about yourself – that includes the previous experience in e-commerce business, other business they own, and anything else that may be relevant to your purchase decision.
It is also vital to acquire as much information as possible about how the business is operated. Some e-commerce websites have documents that are official standard operating procedures. That will make you're taking over a lot easier as you have a set of rules to follow. Additionally, ask them if they run the business themselves or hire additional staff.
Ask for Sales Data and Website Visits
You should always demand the seller to send you a profit and loss statement for the previous year. That includes detailed information about revenue, gross profit, cost of goods sold, operating expenses, net income, etc. In other words, you want a comprehensive financial report that would prove the claims that the seller makes about earnings.
Furthermore, you may want to check the website traffic. The best way to do that is to ask for access to Google Analytics. There is no need for the seller to worry about anything as the access can be read-only option for this tool, and this is all what you need...
Here are some things to keep in mind:
If you notice a bounce rate less than 30%, or higher than 90%, and session duration lower than at least 45 seconds (or less than two opened pages per session), it may be a sign that the traffic sources are untrustworthy.
You want to ensure that the website has had a constant number of visits over the last several months. If the number has significantly increased lately, make sure to determine the reason for that.
Make a difference between organic, referral, direct, and paid traffic, as well as the one coming from social media. Any option that seems legit and doesn’t require any investment is acceptable.
Finalizing the Sale
If you think you made the right choice, and want to finalize the deal, it is time to enter the negotiation phase. Since you asked so many questions to the seller, it is only natural to introduce yourself. Tell them a bit more what makes you a reliable and trustworthy buyer.
Once you establish trust, you can talk about your plans with the business. It is something that a seller might want to know, especially if they care about their e-commerce business. Finally, ask them about the price, or give your offer. However, make sure to explain why you’ve chosen to offer that amount of money (estimated monthly earnings, future potential, etc.).
Now, once you agree on the price, you may want to ask an attorney to analyze all legal aspects of the deal. That might not be necessary if you are buying small e-commerce online business and using a marketplace as a mediator. However, make sure that the seller confirms there are no lawsuits currently related to the business.
Finally, determine all the details about the payment. You may want to pay in installments, but the seller needs to agree on that. You should also ensure to agree on a support period during which the seller is obliged to answer any question or concern that you have about the business. Also, make sure to negotiate social media accounts, mailing lists, product images, and other resources that may be a part of the transaction.
Final Take
If everything goes right, you will soon become the owner of an e-commerce website. As you can see, the process is not complicated. However, it will take a bit of time and effort to choose the right company, and make sure everything goes smoothly. Once you finalize the transfer, it is time to design a strategy to skyrocket your e-commerce business and boost your profits.
An In-depth Step-by-Step Guide to Buying a Franchise
Approximately 1 out of 12 businesses in the USA is a franchise business. Opportunities like franchising and entrepreneurship through acquisition are some of the great ideas for business-minded people looking to run a business without the struggle of creating a new business from scratch. However, establishing a successful franchise takes more than merely finding an ideal franchisor and financing your business. It is a complex step that requires careful planning and strategizing. You need to conduct comprehensive research, review the necessary documents, and follow the steps below.
Approximately 1 out of 12 businesses in the USA is a franchise business. Opportunities like franchising and entrepreneurship through acquisition are some of the great ideas for business minded people looking to run a business without the struggle of creating a new business from scratch. However, establishing a successful franchise takes more than merely finding an ideal franchisor and financing your business. It is a complex step that requires careful planning and strategizing. You need to conduct comprehensive research, review the necessary documents, and follow the steps below.
Conduct Rigorous Research
Finding out the necessary information is the first step you should take when you need to buy a franchise. Thorough research will ensure that your venture into a field of your interest, within your budget and your qualifications. You need to ensure that you meet the basic requirements necessary to start a franchise and also assess your resources, skills, and interests. Your research needs to involve:
Talking To Franchisees
Take time to talk to current franchisees. Gaining an insight into their experience with franchising will help you avoid mistakes in yours, and examine what they did right and maybe use it for your business. Through franchisees, you will also identify the pros, cons, challenges, and hidden costs of running a franchise.
The Type of Franchise
Choosing the right franchise is an important step. To arrive at the right decision, you will need to examine your skills, the type of environment you want to work in, your interests, and your goals. Depending on your needs and budget, you can find companies willing to sell a start-up or already established business. You should also determine the amount of money you are ready to invest and the profits you would like to make from the franchise. This information will help you choose the right franchise.
The Qualifications Requirements
Franchisors set minimum requirements for their franchisees to protect their bottom line and ensure that the franchisees are qualified both financially and professionally. Qualifications vary depending on the type of franchise and the franchisors, but the standard requirements include a credit score, management experience, industry experience, net worth, outside income, and cash in hand.
Fill Your Initial Application Forms and FDDs
Once you have done your research and identified the franchise, the next step is to choose 1 to 3 companies to consider. These companies will give you a representative who will provide you with information about their company. You will also fill the first application forms and preliminary questionnaires. If the franchise is satisfied with your answers, you will receive a copy of the franchise disclosure document (FDD).
The FDD is a 50+ page document that indicates the fees you need to pay, your responsibilities as a franchise, information about the franchisor, and your responsibilities as a franchisee. Make sure you study this document to ensure that it is a good fit. The federal trade commission mandates franchisors to provide franchisees with the FDD at least 14 days before making any binding agreements.
Review The Agreement
If the franchisor decides that you are the right candidate to acquire their business, they will draft and offer a formal contract. Reviewing the agreement ensures that you understand everything before you sign it, so take time to read through the document and hire a franchise lawyer to help you better understand the terms of the contract. The contract gives you the legal right to own a franchise under its rules and regulations. The contract should indicate the rules on the transfer of ownership, royalty fees, hiring staff, protection of territory, pricing, suppliers, among others. Any promises made verbally also need to be put in writing, and any discrepancies between verbal and written terms should be clarified.
Investigate The Company
Once you have settled on a franchisor, you will then need to investigate the company. Buying a franchise involves developing a relationship with the company; it is vital to make sure that it is the right relationship, therefore, take time to talk to its executives, ask questions and also gather information about the company on your own.
Attending a discovery day is a good opportunity for the franchisee to get to know the franchise. It is an opportunity to learn about their culture and understand the people who will be working with you. Make sure you ask questions and voice your concerns during discovery day. A typical discovery day involves one-on-one meetings, interviews, a visit to the franchise location, and group presentations.
A discovery day is also beneficial to the franchise company. It allows them to get to know you better and assess whether you are a good fit for their company. They will also evaluate your level of enthusiasm and commitment at which will dictate their decision to sell a business to you.
Acquire Finances
You cannot run a business without finances. Before you buy a business, make sure you acquire finances to cover the costs of running a business. Franchisors may help arrange finances, but you will also need to qualify for financing on your own. A credit score of 700 gives you a better chance of securing funding. You can finance your start-up through SBA loans, traditional bank loans, search funds, rollover for business start-ups (ROBS), or a government grant.
Create A Business Plan
A business plan is not only a guideline for your business, but it also aids in acquiring finances. It keeps you focused, helps you achieve your goals, keeps you on the right track, and thorough market analysis gives you a better understanding of your market. Document every detail of your business to ensure that everything runs smoothly.
A business plan shows investors that they are investing in a company with a vision and one which will last and grow. It helps them understand your vision and passions and shows where their money is going. Franchise opportunities require careful considerations, and creating a business plan helps assess your franchise's visibility.
Talk To a Franchise Attorney
If you are considering franchising, make sure you talk to a franchise attorney. These attorneys specialize in franchising, and they have a vast knowledge of franchising. A qualified franchise attorney will help you know everything that you need to know about franchising. This is because they know what to focus on in the FDD and the franchise contract; writing and working on similar documents gives them better insight. They know what to look for when reviewing the documents.
A good franchise attorney also helps the franchisee choose the best entity for their business. The right entity determines the legal rights and liabilities of the business and its taxation. You can also rely on your attorney for help when things do not work out as you expected. They also form an invaluable asset for the business as they can help negotiate the terms and conditions of the agreement and offer guidance to the vague aspects of the contract.
Picking a Location
Take into consideration the guidelines and recommendations of the franchisor to help you find an ideal location. In some cases, the franchisor may have strict rules for commercial real estate, including the number of parking lots, territory requirements, and the minimum squire footage.
Leasing a space is cost-effective, and less risky; however, if you intend to be in the place for more than seven years, consider buying your location. Whether it is leasing or purchasing a space, consider the safety of the area, the location of your employees and customers, the square footage, and negotiate the price.
Acquire The Necessary Skills And Knowledge Of Running A Business
Before you open your business, take the opportunity to acquire the necessary skills and knowledge to run a franchise. Typically, the franchisor will provide training sessions that will tackle everything you need to know about the business, including the policies and guidelines, the products and services the systems you will be using. Working in a store is an ideal way of determining how a franchise works and whether your skills and personality match the company culture.
Open Your Business
This is the final step; it comes after you have finalized everything, and the franchisor representative approves your location. The franchisor will give you a hand during the actual opening. Marketing your grand opening is an excellent way to promote and market the business. It ensures that you build your customer base quickly. Before the grand opening, potential alert customers of the existence of your store, and you can also do a soft opening to identify and deal with the operation problems before the grand opening. The franchisor has pre-determined promotion ideas, signage, and ads for the grand opening in most cases.
It is worth noting that franchising does not eliminate the risks of owning a business. However, it allows the entrepreneur to handle the responsibilities that come with owning a business. It comes with an already Get Matched Now.
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