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The Top 5 Ways to Finance Buying an Existing Business
Are you looking for innovative ways to finance buying an existing business? Read on to learn about some common ways to finance buying an existing business.
Buying a business
Here are five ways to financing your acquisition
Are you looking for innovative ways to finance buying an existing business? Read on to learn more.
Finance buying an existing business
In a lot of ways, running your own business is the ultimate fulfillment of the American dream. You set your own hours, act as your own boss, and get to spend your days doing something you love. But how can you become a business owner without all the risk that comes along with starting something from scratch?
What do you do if you want to finance buying an existing business?
There are a number of ways to approach business financing. From making arrangements with the seller to getting a standard loan, you can choose the option that works best for you. Read on to learn about some common ways to finance buying an existing business.
1. Seller Financing
Depending on who you’re buying your business from, you may be able to get the seller to finance the sale of the business. Like with a loan, you pay an agreed-upon amount every month for a certain period of time until you’ve paid for the business in full. This gives the business owner a guaranteed source of income for the life of the loan, and it allows you to avoid the initial up-front expense of buying them out.
2. Partnership
If your seller won’t finance your purchase but you want to avoid a traditional loan, you may be able to go into business with a partner. Each of you would pay for a portion of the business, and you would run it together. This effectively doubles the amount of capital you have to invest in this business and gives you some help in running it.
3. Sell Stock To Employees
If you plan on having a number of employees, another financing option may be to sell stock to your employees. You’ll have to organize the business as an S-Corp or a C-Corp, and we would recommend selling non-voting stock so you retain ownership. But this option can get you a huge discount – possibly as much as 90 percent – on the business price.
4. Lease The Business
As with many other large purchases, one of your options with buying a business is to lease it. This will require cooperation with your seller since you will take over running the business and pay them a fee each month, while they still retain ownership. But it gives you time to build up capital in the business before you make the big purchase.
5. Get A Loan
And, of course, a very popular option for financing buying a business is getting a loan. You can get a term loan, a Small Business Administration loan, or asset-based financing, depending on your situation. You can also use a combination of the three to get the right solution you need to buy your new business.
Learn How to Finance Buying an Existing Business
Starting a business is challenging enough, but knowing how to finance buying an existing business is a whole different ball game. There are a number of different approaches that will work, depending on your needs. Talk to your seller and your bank and see which option will work best for you.
If you’d like to learn more about entrepreneurship through acquisition, check out the rest of our site at BizNexus. We have tools to help you buy or sell a business or franchise. Check out our posts about buying a business to start planning your entrepreneurial success 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.
How to Finance a Business Purchase With Fair to Poor Credit
If you have found the company of your dreams, you may be wondering how to finance a business purchase even if your credit isn't great.
Finance a Business Purchase
With Fair to Poor Credit
Do you want to finance a business but you've had some credit challenges? Read this article to learn how to finance a business purchase with fair to poor credit.
How to finance a business purchase
There are 30.2 million small businesses in the US. Many folks prefer to own businesses because it gives them the creativity and profitability they have always dreamed of.
If you have student loan debt or a business venture that failed in the past, you may have poor credit.
You may also, however, find yourself with the opportunity to purchase a business that would be a great fit for your skills and experience.
If you are wondering how to finance a business purchase with fair or poor credit, you are not without options. Here are some ways to finance the purchase of the successful business you have always hoped to own.
1. Check Over Your Credit Report
Your own credit may not be as bad as you think. There may be payments that were not recorded, so you can contact companies with proof of payments.
You can also get your score back up by paying down some debt gradually. This may involve getting a second job for a little while, or finding another way to supplement your income.
2. Meet With A Small Business Administration Counselor
You can make an appointment to present your entire plan to a Small Business Administration (SBA) counselor.
They can give you tips on how to improve your plan so it better suits what lenders are seeking. The lender will also already have existing relationships with SBA lenders.
When you visit your counselor, it is important to make your plan look as professional as possible. Demonstrate how your business has been profitable and why you are capable of running it. Highlight the profitability of the business you want to buy, as well as its future growth potential.
When applying for a loan from anywhere, you must fill out an application. Bringing supporting documentation and dressing professionally will also help you.
3. Get A Microloan
If you can't get a loan from a bank, look for investors within your network, as well as micro-lenders.
Microloans are specifically designed for those who can't get loans elsewhere, and the SBA guarantees them. The downside is that interest and fees are higher. There is also a credit limit of $50,000.
4. Get A Bad Credit Loan
Many banks give out bad credit loans. While they initially come with a higher interest rate and fees, many lenders will renegotiate if you are making your payments on time.
5. Borrow Against Your Home
If you are certain that the business you wish to purchase will be successful, you may be able to get a loan from a bank by using your house as collateral. Take out a second mortgage or take out a home equity line of credit.
6. Who You Know
Your family and friends won't ask to see your credit report if you can convince them your business will be successful. You can ask them for funding and talk about their involvement in the future of your business.
7. Government Financing
Some federal and state government programs will finance your business if you meet certain criteria. You may be a veteran or involved in certain types of research. Depending upon your business and situation, they may not even require repayment.
How to Finance A Business Purchase With Fair to Poor Credit
If you have found the company of your dreams, you may be wondering how to finance a business purchase even if your credit isn't great. With a little homework and the right connections, you might find yourself the owner of a profitable business in no time.
For more information on investing in businesses, read our blog 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.
5 Effective Ways for Financing a Business Purchase
Financing a business purchase can be challenging, but there are some options to help you make this purchase. Keep reading to learn what these options are.
Financing a Business Purchase
5 Effective Ways
Financing a business purchase can be challenging, but there are some options to help you make this purchase. Keep reading to learn what these options are.
Financing a business purchase
In the third quarter of 2015, the median sales price for a business sold was $185,000. Most people don't have that much cash on hand.
This means financing a business purchase is the only option. But there are several ways to find finance to buy a business.
Which one you choose often depends on your current financial situation and the type of business you're looking to buy. We want to help you make the right decision on how to make a successful small business acquisition.
Keep reading as we list five effective ways to acquire financing to buy a business.
1. Financing a Business Purchase With a Bank Loan
If you want to buy a business and are thinking of making the purchase with a bank loan, make sure the existing company has substantial assets. Also, you'll need to prove you have good credit and a proven track record in the industry.
Expect that trying to obtain a bank loan to be very difficult and time-consuming.
2. SBA Loans
The Small Business Administration (SBA) also provides loans. The best option to buy a business is to apply for an SBA 7A loan.
If approved, you can get a loan of up to $5 million dollars. However, to qualify for the loan you must have the following:
Good credit
Provide three years of tax information
Provide personal finance information
Show prior experience in the industry
You must also prove you can put 20% down. However, you can also find that extra 20% through seller financing.
3. Seller Financing
Seller financing is another option. With this option, you ask the seller to provide financing in the form of a loan.
Typically this loan is amortized of a period of time and you pay the loan back using the proceeds of the business. This is an easier method to obtain than traditional financing methods such as a bank.
More Transparent
It's more flexible, can often be cheaper, and since the seller wants to be paid back, they will be more inclined to provide you with accurate financial documentation.
However, don't expect a seller to finance more than anywhere between 30% to 60% of the business unless you come armed with additional assets and can make a large down-payment.
4. A Leveraged Buyout
A leveraged buyout happens when the buyer acquires a company using a significant amount of borrowed money to buy the company. Often the assets of the company being bought are used as collateral for the loans such as:
Equipment
Real estate
Inventory
The assets of the acquiring company can also be used.
However, if things don't go as planned, it may have a largely negative impact on your rate of return. Your losses may also be maximized.
5. Get Financing Online
You have options when it comes to finding an online source to get a loan. You can choose a business loan, personal loan, and even a HELOC (home equity line of credit).
Shop around for the best interest rates. Also, not all lenders are willing to give money to buy a business.
We Help With Financing
Financing a business purchase isn't always easy because not every lender wants to deal with the risk. We're different.
We want to help entrepreneurs buy and sell their businesses with as little effort as possible. And we can help you with financing. Click here to learn how.
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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.
5 Ways on How to Exit/Sell Your Business Quickly
Here are some of the ways how you can exit your business smoothly, but make sure to leave the company in safe hands. Make sure that the business is profitable as it is easier to sell a company that guarantees a steady profit.
Sell Your Business Quickly
Here are 5 ways to sell or exit your business quickly
Exit or Sell Your Business Quickly
You had a good run with your company and plenty of success. However, it seems that you are not ready to stick around anymore. Here are some of the ways how you can exit your business smoothly, but make sure to leave the company in safe hands.
Find an Interested Buyer
If you set your mind on selling the company, you should start looking for interested buyers. Keep in mind that this process may require a bit of time and patience.
Here are some things that you can do to prepare your company for sale:
Make sure that the business is profitable as it is easier to sell a company that guarantees a steady profit.
Call your accountant and review the finances. Make sure that there are no issues, and everything is clean.
Prepare a report with revenues and expenses over the last year. You can even go and prepare a financial projection for the upcoming period.
You can put up your business for sale in an online marketplace, or spread the word among the people you know in your industry. Depending on the attractiveness of your company, interested buyers should appear soon.
Offer the Business to Existing Staff
An alternative way of selling the company can be offering it to the existing staff. You may have managers, accountants, and other people working for you.
Ask them if they would be interested in taking over the business full-time because you want to exit. If they have the necessary resources and desire to buy you out, they will respond positively to your offer. That is a great way of selling the company, but ensuring that it is in the hands of someone who knows it inside and out.
Pass the Company to a Family Member or a Friend
If you think it is time for the next chapter in your career, how about offering the current company to a family member or friend? Find someone in your surroundings who is capable of doing a good job and maintaining a profitable business. If you believe they are the right choice, go ahead and pass the company to them, or hire them as CEOs while you remain the owner formally.
Find a Business Partner
If you can’t find a buyer to purchase your business, how about finding a partner? That may mean you won’t exit the company completely, but the partner may take over the areas you don’t want to handle anymore.
That is a great way to remain in the business while finding a new dose of motivation. Who knows, that may be the boost you need to take the company to the next level.
Initial Public Offering
While this may be an enticing option, keep in mind your company needs to be attractive enough for the public. Believe it or not, less than 0.01% of US companies are public. If you estimate that this can be the right move, it may be an excellent way to earn a lot of money.
Liquidation and Bankruptcy
Finally, you can also go with liquidation or bankruptcy. However, keep in mind that this means you will not only exit, but also close the business. That is why it is important to assess all your options and use this one as a final resort.
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PREPARING TO EXIT YOUR COMPANY
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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.
6 Reasons to Buy a Business Instead of Starting a New One
One of the major advantages of buying a business is that financials already exists. An existing business can easily develop an accurate financial estimate or gauge future earnings.
Do You Want To Buy A Business?
Instead of starting a new one
Startup, startup, startup. These days anybody and everybody who thinks of entrepreneurship think of starting something from scratch…. Make the pitch deck, get the funding, get the ego-stroking valuation you can tell all of your friends and family about inside and outside of startup land…
A recent study, showed nearly 20% of small businesses fail in their first year, 30% fail in their second year and about 50% of small businesses fail after five years in business. Statistics like this make starting a new business a scary proposition.
On the other hand, you have an improved chance of succeeding when you buy an existing business. Here are some reasons to consider buying an existing business instead of starting a new one.
Financials Already Exist
One of the major advantages of buying a business is that financials already exists. An existing business can easily develop an accurate financial estimate or gauge future earnings. However, new businesses have to rely on pro forma budgets where they forecast revenues, cash flow, taxes, and expenses in advance.
Cash Flow is Predictable
Furthermore, existing businesses have immediate and anticipated cash flow. When you buy an existing business, you have estimated revenue for the payroll, operations, taxes, and debt service to rely upon. However, if you start your business from scratch, you have to wait for several months before you have the adequate cash flow to cover these costs.
Established Suppliers and Credit Lines
In addition, existing businesses have established suppliers and credit lines. You can easily get a loan or line of credit. However, if you start your business from scratch, it will take quite some time before you establish a relationship with any supplier. Also, you will find it hard to secure loans or supplier credit.
Established Customer Base
As a new business, you need to find customers for your new startup. You have to run a series of promos, discounts, referrals, and offers. Besides, it also takes time to build a loyal customer base. On the other hand, existing businesses have an established customer base. Once you buy the business, you only need to focus on the existing customer base, deliver quality services, and improve customer experience.
Licenses and Permits
Before you can operate as a business, you need to be granted licenses and permits by the body overseeing your sector. This may take quite some time, weeks or even months. In fact, you may even be denied a license to sell your products if you fail to meet certain criteria. However, existing businesses already have all the required licenses and permits. Once you purchase the business, all licenses and permits will be transferred to you.
Ease of Finance
Finally, an existing business already has a history, mode of operation, as well as a proven track record. If you need business financing, you can base your lending decision on actual results and not just estimates and calculated guesses. Thus, making it easier to secure business financing from banks and lenders.
To Recap it all for you
6 reasons to buy an existing business instead of starting one. There are several risks involved in becoming your own boss. When you buy an already existing business, you are taking a calculated risk which eliminates several pitfalls and failure potentials that come with starting your business from scratch.
Planning to buy a business?
Buying a business is a huge decision. You need to ensure that you get it right. Contact us today to know more about BizNexus. Our expert team will be available to speak with you and discuss the options available to you. A fantastic experience awaits you.
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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 a New Franchise When You Want to Own a Business
You don't have to struggle to buy a new franchise. Click here to 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.
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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BUSINESS ACQUISITION
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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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.
What to Do before Selling Your SaaS Business
Are you thinking of selling your software as a service (SaaS) business? Remember, buyers most often buy SaaS businesses for financial or tactical reasons. Know what they want in an acquisition, and you will be in a better position to undergo the entire process without much difficulty.
Are you thinking of selling your software as a service (SaaS) business? Remember, buyers most often buy SaaS businesses for financial or tactical reasons. Know what they want in an acquisition, and you will be in a better position to undergo the entire process without much difficulty.
Establish the Value of Your SaaS Business
It doesn’t matter if you are selling a SaaS business or a website; you need to find out the best price to sell your business. To know what you may receive in the market, you need to get a valuation of your SaaS business to be aware of what it’s worth. After that, start setting up your company’s prospectus, including the facts, figures, and numbers. Typically, this is done by computing the annual revenue generated by your SaaS business and doubling up that amount. Also, factor in the amount you’ll compensate the broker or marketplace you use to sell your SaaS business.
Put Your Books in Order
Recurring proceeds is one of the highest draws to a SaaS business. Nevertheless, in terms of increasing revenue generation, a growing business doesn’t guarantee that buyers will pounce on your deal. Potential buyers are often not much intrigued by ‘what meets the eye’. Meaning, they would be more interested in finding out the fraction of your actually profitable earnings. For this reason, you need to compute costs, such as costs of acquiring customers, your rate of churn, your average growth rate, and more.
To put your books in order, you need to think about maximizing profits and minimizing expenses. Usually, it’s less costly to retain, serve, get existing clients to subscribe and renew than trying to attract new customers to swap the cash flow. Additionally, upgrade your systems time and again to help you lessen cancellations. One thoughtful way of minimizing costs is cutting down human assistance. Use tutorials, videos, and knowledge bases to reduce the need for interaction between humans.
Debug Your Source Code
It doesn’t matter your finances are in good shape. If your source code is disordered, jumbled up, or missing in documentation, potential buyers will be a bit skeptical about your business. In essence, your SaaS business source code ought to be clean, annotated, tested, and verified. It can be overwhelmingly difficult to sell your SaaS business if the source code doesn’t comply with the set standards and guidelines.
As well, a non-reliable, non-concise, overly complicated code can present you challenges as far as selling SaaS businesses is concerned. Being the business proprietor, you need to be familiar with all the entries and exits of your source code. For a reason, it will present fewer challenges to the buyer; in case they want to alter or upgrade the software. Aside from that, a well-documented source code lets the seller take over your business naturally.
Assess if You Need External Assistance to Sell Your SaaS Business
Note that, a reliable online business broker can help you get a valuation of your SaaS business. This is necessary so you are clear about what your business is worth. The good thing, you won’t need to meet your preferred business broker physically. Schedule time to chat with a reliable online business broker (website to advertise) to identify appropriate buyers. Of course, you need to have completed the valuation and prospectus before you start looking for buyers.
An extensively experienced online business broker can help you prepare and move you through the entire process of selling your SaaS company. More importantly, letting an expert online business broker negotiate the price with prospective customers on your behalf removes you from the equation. As a result, it eases the discomfort you might have when it comes to the actual transaction.
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