Why Start a Business When You Can Buy a Business?

So you want to run your own business

Why not buy a business instead?

6 Reasons on Why Buy a Business

1. You have a foundation.

2. You have a brand.

3. You have a market.

4. You have a problem-solving process in place.

5. You don’t need startup funding.

6. You already have a team.

Buying a business can be better than starting a business. 

If you buy a business, you sometimes know that there is a proven business model. You know that business has had success, that there's profit with the business. 

If you're unsure of buying a business because you want your own foundation, then you should consider the benefits of buying a business. You should consider how it gives you a headstart on everything. 

Here's a guide on why you should buy a business instead of starting your own business. 

There's Already a Foundation

One of the benefits of buying a business is that there's already a foundation. There's often less work when it comes to buying a business. 

You don't have to worry about creating a marketing strategy, have a business plan, or finding a building to house your business. You may already have the employees you need to continue with the business. 

The great thing about buying a business is that you aren't starting on step 1, you are starting on step 5. 

Here's a more detailed look at why buying a business can be more beneficial, giving you a head start on revenue. 

You Already Have a Brand

If you start a business, it can take a while to build a brand. People don't know about your business or how you can help them. Building a brand takes time because it requires marketing and building a customer base. 

But when you buy a brand that's a part of a business, you already have an existing market that knows how you can help them. 

You already have a story that resonates with people. You know what benefits them. 

Buying a brand also means that you already have predesigned logos and other signage that represents your brand. 

You Already Have a Market

Buying a business also means that you already have an existing market. You don't have to figure out who your ideal buyer is. You already know everything about them and how you can help them. 

When you buy a business, you don't have to worry about attracting new customers because you already have loyal customers who know everything about your business. 

You know the demographics, their age, what they like to do, and how to solve their problems. These are some of the challenges you would have to consider solving if you were starting a business. 

When you buy a business, you only need to make minor adjustments to your target market. If the business you are buying is struggling, you may have to do more research on your target market, but the most essential information should be there. 

You Know How to Solve the Problem

If you're buying a business that is struggling to attract new customers or has other problems, you may find that it's a problem you can solve. 

You may see an opportunity in a business that is struggling. This can sometimes make it more of a profitable opportunity than starting a business. 

Another problem you are solving is having fewer competitors in your industry. If you were to start a business, you would have so many competitors. But buying a business means you have to compete against one less. 

You Don't Need Financials to Get Your Business Started

Whenever you start a business, you need a market analysis and a detailed financial plan. It should outline your 6-month and 12-month revenue goals. 

If you buy a business, you don't have to worry about the financials as much. While you still need a financial goal, you don't need to start from the very bottom. The business you are buying should already have an idea of how much they are making each quarter. 

The business you are buying should tell you profit margins, what's selling, what's struggling, as well as other financial plans. It can give you an idea of if you want to buy that business or if you want to pass on it. 

The final financial benefit you should be aware of when you buy a business is that you have immediate cash flow. You don't have to wait for customers to find your business and start buying. 

Everything should already be in place for you to make money. When you take over a business, the goal is to make changes so you can increase that cash flow. 

You Already Have Employees

The final benefit of buying a business is that you already have employees. While you can choose to bring your own team in, it's not something you have to rush. 

You can choose to evaluate the current employees and train them on new policies when you take over a business. It's not something that you have to rush when you buy a business. 

It can also make running a business easier instead of starting a business because you already have a team in place that knows their role. You don't have to hire from scratch. 

Now It's Time to Buy a Business

Deciding to buy a business can be still challenging, but it's sometimes far less challenging than starting from scratch with starting your own business. This is why it's important to consider the benefits of buying a business. 

When you understand how most of everything is in place when you buy a business, you realize how much easier it is. However, it's important to remember that you still need to do your research on what business to buy and see how much revenue they are producing. 

If you're considering buying a business, you can get matched with the perfect business here on our website. You can also start identifying your existing market.

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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.

8 Insider Secrets To Buying a SaaS Business

Software as a service (SaaS) is booming

Do you want to hop on the train?

Here are Eight Secrets to Buying a SaaS Business:

1. Check for product profitability.

2. Check industry growth level.

3. Identify potentials.

4. Understand why the business is being sold.

5. How good are the competitors?

6. Can you bring your own team.

7. Are there any lawsuits or legal disputes?

8. What is the company’s reputation?

Buying a SaaS company can be a brilliant idea. 

If you're considering buying a SaaS company, you may find that there's a lot of potential in these businesses. You'll discover that you can make a lot with SaaS. 

Of course, there are a lot of factors that go into buying a SaaS business. You have to consider what it means to buy a business in this industry around software and tech. You have to consider the market and how profitable your niche is. 

Before you dive into buying a SaaS business, you need to know the eight insider secrets to buying one of these businesses. 

It can help you find a SaaS business that is profitable and worth buying. 

1. Is the Product Profitable? 

One of the main things you should find out about is if the SaaS business is profitable. You should see if the product they are selling is profitable. 

It can give you an idea if you can produce a similar profit if you were to buy the business. 

One of the ways to find out if the business is profitable is to look at the businesses' financials. You are assessing the financial risk of buying a business that is either making a profit or not. You are also looking at the profit margins. 

The profit margins can be an indicator of how much the business is making after they pay for overhead. Don't be afraid to ask the owner for the financials if you are considering buying their SaaS business.

2. What's the Industry Look Like in the Next Five Years? 

Another secret to buying a SaaS business is figuring out what the industry looks like in your specific niche.

There are various kinds of SaaS that range from customer relationship management to accounting software and email software. If you are considering buying a particular SaaS business in, for example, customer relationship management, you need to figure out what that industry looks like in five. 

You don't want to buy a business that is behind the curve and has limited potential. 

3. What's the Potential? 

When it comes to potential, you need to figure out the possibilities for the SaaS business you want to buy. 

Even if the business you want to buy has low-profit margins, you may discover that the company has a lot of profit potential. There's potential in marketing and branding the business. 

4. Why Is This SaaS Business Getting Sold? 

Don't be afraid to ask a business owner why they are selling a business. 

It could be that they are in legal trouble; they aren't making a profit or something else that is forcing them to make a sale. You don't want to inherit that kind of trouble. 

When you find out why a SaaS business is for sale, it can give you an idea of if you should proceed forward with putting an offer on that business. 

5. How Much Better Are Your Competitors? 

Another secret to buying a SaaS business is finding out about competitors. 

If the competitors of the SaaS business you want to buy are formidably and astronomically better in every area of business, it could make it hard for you to compete with them after you buy the SaaS business. 

However, if you discover that the SaaS business you want to buy is staying competitive and considered one of the best, then it's a good business to invest in. 

6. Can You Hire Your Own Team? 

Sometimes buying a business comes with stipulations. 

For example, if a SaaS business owner wants their business and makes sure the employees are kept on, it could be something non-negotiable. 

This is something you want to find out before you purchase a SaaS business, especially if you want to bring your own team along. 

7. Are There Any Lawsuits?  

If there are any pending lawsuits against the SaaS business you want to buy, it could put you in a sticky situation. You could be inheriting those lawsuit issues that make it difficult for you to run your business. 

You want to make sure you do your due diligence and find out if there any legal issues the business is facing. 

In addition, you also want to make sure the business isn't doing anything unethical. If you buy a business and find out there are some illegal activities being done; it can be done against you. 

8. What Is the Company's Reputation?  

The final secret about buying a SaaS business is figuring the SaaS company's reputation before buying it. 

You want to see what people are saying about the SaaS business on Google and other kinds of reviews. It can give you an idea of if people have a positive or negative perception of the business you are about to buy. 

If people have a negative view of the SaaS business, it can be more difficult for you to change that perception after you've bought the business. 

Now You Know Everything About Buying a SaaS Business

When it comes to buying a SaaS business, you need to know everything there is to it. These secrets can give you insight into making the best decision. It can guide you when you are finally ready to buy a SaaS business. 

It's important to remember, however, that you should be patient when you do buy a business. You shouldn't rush into something because it has a good price tag. You should ask these questions, so you don't end up buying a bad business. 

If you are thinking about buying a business, you can visit our website and see how we can help you. 

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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 Use Seller Financing to Buy a Business: A Guide

Need some help getting the funds?

Check out this guide on how to use seller financing to buy a business.

Here’s What We Are Covering:

1. Advantages of buying a business.

2. What to look for when buying a business.

3. Using seller financing to buy a business

4. Learn the 5 steps to seller financing.

5. Benefits to seller financing.

6. Finding a business to buy.

You may have an entrepreneurial spirit and dream to own your own business. Now for the next step: how to turn that vision into reality?

You may begin to research different options. A startup involves a substantial initial investment of time, energy, and resources. It could be a while before you see any return on investment.

Another avenue is to buy an already established business. Finding a business will involve some legwork and talking to people in the industry, but the business has proven its viability in the market.

When it comes to acquiring a business, you have some additional financial options. Unlike a startup, which would rely on your own investment, investments from others, or traditional financing, you have another option of seller financing to buy a business that already exists.

Advantages of Buying a Business

There are some obvious advantages to buying a business, such as acquiring an existing customer base. This could otherwise take you years to establish. 

With an existing business, you will know the profits of the company. You may even be able to take regular draws or salary, which would be far less likely in a startup.

You would also be acquiring an existing operation. The business may have employees that would be retained after the acquisition and be a valuable asset going forward. This is much simpler than building the operation from scratch with a startup.

What to Look for When Buying a Business

Your steps in buying a business will usually involve three phases: search, negotiation, and closing the transaction.

As you begin your search, you will want to ask yourself the following questions about any business that you would consider buying:

• Why is the business for sale?

• What is the reputation of the business?

• What are the profits of the business?

• Do you think you can increase profitability?

The process of buying a business can be complex. You should use a business attorney to review the deal structure and an accountant to review the bank transactions, financial statements, and tax returns.

You should inspect the assets, such as any offices, storefronts, or equipment. Note the condition and cleanliness of these, as they reflect on the owner's care. You will also want to review any liabilities that the business has, including pending judgments or lawsuits that may not appear on financial records.

Once the deal's negotiations have been completed, you can move to the final phase and close the transaction. This is where funding will come into play.

Using Seller Financing to Buy a Business

When you use seller financing, the seller is essentially acting as the lender. A majority of small to mid-sized business acquisitions involve some kind of seller financing.

For the buyer, this can help achieve business ownership if there is not enough cash to buy the business otherwise. It removes bankers from the transaction and allows the seller and buyer to work together to finalize the deal.

The seller will carry the promissory note, and the buyer makes payments to the seller. This can range anywhere from 30-60% of the purchase price.

The terms of the loan are typically something like 5-7 years. Usually, collateral will be required, such as a mortgage on commercial real estate, along with a personal guarantee.

Seller financing shows that the seller has confidence in the profitability and performance of the business.

Steps to Seller Financing

Since the seller is acting as the financier of the transaction, there are some steps involved that are similar to what a bank loan would require.

1. The buyer will submit an application, including relevant personal financial information.

2. The buyer will prepare a business plan, as well as provide background and experience.

3. The seller will pull a credit report on the buyer.

4. The buyer may need additional funding, such as a traditional loan or investment from friends or family if there is still a gap between seller financing and purchase price.

5. The transaction is closed, with a lawyer or business broker drawing up the agreement.

When the seller is providing financing, the seller will want to determine the buyer's creditworthiness to ensure that the loan will be repaid.

Benefits to Seller Financing

In some ways, seller financing may benefit you even more than a traditional bank loan. You have likely already developed a relationship with the seller throughout the acquisition, and the financing is one more way to continue to work together.

A seller may be more flexible than the stringent requirements of a bank. And, unlike a bank, you have the ability to negotiate the terms of the financing with the seller.

Bank financing will typically involve a lot of fees. For example, you may have documentation fees or origination fees. Seller financing will have fewer fees.

Most importantly, you have the vested interest of the seller. The seller will want to ensure that the business continues its success, so the loan is repaid. The seller may continue to advise or consult with you as you take over the business, which can help with the transition both in the short- and long term.

Finding a Business to Buy

As you begin a search for an existing business to buy, you could start with traditional approaches of looking in your community and talking to people in the industry. Or you can take your search online. 

You can be matched with acquisition opportunities in your area based on your criteria and connect with a seller. Once you find a good fit, you can discuss the financing, including if seller financing to buy a business is an option.

Find a business for sale 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.

How to Buy a SaaS Company: A Guide

Need some help with making the right purchase?

Check out this guide on how to buy a SaaS company.

Here’s What We’re Covering:

1. Why buy a SaaS business?

2. Where to buy a SaaS company?

3. Financial due diligence.

4. Technical due diligence.

5. Marketing channels.

6. Research competitors

7. Company branding

8. How to buy a SaaS company?

The SaaS business model is gaining traction. In fact, by 2022 SaaS revenue is projected to reach $143.7 billion.

The SaaS model is low-cost, scalable, and robust. One of the major advantages of SaaS companies is that they're cloud-based. Because of this, they have been largely unaffected by the current pandemic.

Are you considering acquiring a SaaS business? Keep reading to find out everything you need to know about how to buy a SaaS company.

Why Buy a SaaS Business?

There are a number of reasons to consider buying a SaaS business. First of all, you're getting your hands on a business that's already making money. The SaaS model is subscription-based, which can be very lucrative in the long term.

SaaS is also a robust business model. Because the software runs in the cloud, you don't have to worry about managing supply chains or the logistics that come with operating physical hardware.

An established SaaS business has already done the hard work of breaking into the market and acquiring paying clients. If you were to build your own SaaS business, it would take a lot of time before the profits began rolling in.

When purchasing a SaaS company, there are different ways to make money. You could buy it cheap and try to flip it. Or, you could use your skills to grow the business, build new revenue channels, and sell it in 3-5 years.

Where to Buy a SaaS Company?

If you've decided to buy a SaaS business, the next decision you need to make is where to buy one?

If you choose to go through a broker, then you need to do some research on different marketplaces. There may be several good-looking business brokers out there, but it's your job to vet them.

Is the brokerage legit? Do they have a proven track record of making successful sales? These are the kinds of questions you need to be asking when vetting different marketplaces.

Check reviews to see whether their customers are satisfied with their services. By following these simple steps, you can narrow down your search to only the very best brokers.

The advantage of using a broker instead of buying privately is that the broker will check the legitimacy of the businesses before putting them on their marketplace. This can save you a lot of time. Just make sure their vetting process is up to scratch.

A good broker will ease your anxiety when working through a deal. That's why many people choose to work through a marketplace instead of buying privately.

However, using a broker doesn't mean you don't need to do your own due diligence. 

Financial Due Diligence

One of the most important steps before buying a SaaS business is checking their financial accounts.

Remember, screenshots of monthly revenue and traffic are not enough to discern whether the performance of the business matches its valuation. Once you've found a listing that interests you, request access to their analytics accounts. Now you can objectively assess the data to make sure it all lines up.

Checking revenue is not enough, though. You should also have a look at the company's profit and loss. A SaaS company with high expenses might make you think twice about following through with the purchase.

Technical Due Diligence

The foundation of any SaaS business is the source code. Once you've established an interest in a particular company, you'll want to check out the backend to see how it all runs.

Solid software architecture is very important for scaling a SaaS business. You don't want to buy something that hasn't been built to last. If you don't have the technical ability to assess the code yourself, hire someone who can help you.

Make sure you hire an expert who knows the coding language used by the company. An experienced developer will be able to run through the backend and figure out if there are any weak points in the software.

Marketing Channels

When you're vetting a SaaS business, you should check its marketing and acquisition channels. You need to know what their marketing strategy is and how they acquire new customers.

SaaS businesses usually get traffic from one or more of the following sources:

• Organic traffic (SEO)

• Social

• Referral

• Paid advertising (e.g. Google Ads)

You could consider hiring an SEO expert to check their links and find out where the majority of their traffic comes from. 

If they get all their traffic through paid advertising, then there might be an opportunity for you to improve their SEO and boost organic traffic. Diversifying traffic sources helps build a more robust business.

This can also help attract new customers and increase revenue. Identifying problems like this that you can easily solve, can make the acquisition even more lucrative.

Research Competitors

No matter what kind of business you get into, you'll always be sharing the market with competitors. SaaS companies are no different.

Before you decide to buy, you should have a thorough understanding of who your competitors are and how they operate. For example, are you buying a business at the top of their niche? Or is there still lots of room for growth?

Check competitors to see how their offering compares with yours. How much do they charge? What's included in their fee? How does their software stack up against yours?

Company Branding

You've checked out the source code and you're happy with the product. Now, what can be done to improve the look and feel of the brand?

How does the company present itself online? Check their website and social media pages. Even if their reach on social media is small, it's not a big deal. This represents another opportunity to scale the business.

Check to see if the company has any trademarks and whether they're included in the sale. Before buying a SaaS company you need to know what's included in the deal.

How to Buy a SaaS Company

Now you know how to buy a SaaS company. SaaS businesses are becoming more and more popular due to their robust, cloud-based infrastructure, low costs, and high revenue potential.

If you're looking to buy a SaaS company you need to do your due diligence. Check their accounts, including P&L, and hire a veteran developer to vet their software. Inspect their marketing channels and identify opportunities to improve on SEO and branding.

Are you ready to buy a SaaS company from an experienced and reputable broker? Find a business for sale now.

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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.

A Step-by-Step Guide on How to Get an SBA Loan

Looking to get an SBA loan?

Check out this step-by-step guide on how to get an SBA loan.

6 Steps on How to Get an SBA Loan:

1. Understand why you need the money.

2. Check your eligibility.

3. Choose the right SBA loan program.

4. Find a lender.

5. Prepare your paperwork.

6. Fill out the application form.

A whopping 29% of small businesses fail because of a lack of enough capital.

Are you planning to set up a business but don’t have enough funds? Do you want to add more cash to your existing business? Worry not; this guide will help you know how to get an SBA loan with ease.

SBA loans are government-backed. They have favorable interest rates, flexible repayment terms, and they are easy to get. Millions of entrepreneurs have benefited from the loan, and you can get it too if you are eligible, and you understand the basics. 

Here is the step by step guide to help you acquire it:

Step 1: Understand Why You Need the Money

The first important step to get an SBA loan is to know why you need the money. Before you apply, you should ask yourself if the loan is necessary or you can do without it.

Some legit reasons as to why you need the loan might include:

• To get new pieces of equipment

• To acquire new land for business expansion

• To refinance an old debt with a high interest rate

• To hire new employees

• To add new stock

You might also take a loan to buy a business or finance your startup. Don’t take a loan to finance your home projects. 

The lenders will need to know your loan's purpose and might investigate further to know if that’s how you will use the loan. So plan well, and determine the exact amount to borrow.

Step 2: Check Your Eligibility

Check if you qualify for the loan. Though the SBA loans are meant for entrepreneurs, not all businesses qualify. Here are the standard requirements for most SBA loans:

• Excellent credit score- some lenders check your personal or business credit score. You should ensure that it’s excellent to secure the loan

• A business plan- you should create a valid business plan to enhance transparency

• Business documents- they include your tax payments, balance sheets, profit and loss records, etc

• Size requirements- your firm should meet the SBA requirements of a small business

• Collateral- some lenders may require you to provide collateral if the loan is risky, or you are asking for a larger amount

Some lenders may require proof that you tried to apply for loans from other conventional banks and failed. Confirm that you have every important document to improve your chances of approval.

Step 3: Choose the Right SBA Loan Program

There are three main types of SBA loans. They include SBA 7(a) loans, 504 (a) loans, and the Microloan SBA loans.

SBA 7(A) Loans

They are the most popular. The common type of these loans is the community advantage loans, which are designed for low-income people. The average loan amount for the SBA 7(a) loans ranges from $250,000 to $5 million.

504 (A) Loans

They are great for entrepreneurs who wish to buy new business equipment, renovate buildings, or buy land pieces. The maximum repayment period is 10 years, and the maximum borrowing amount is $5 million.

Microloan SBA Loans

Microloans are smaller, with a maximum borrowing amount of $50,000. The interest rate is low too.

You can only choose the right type of loan when you understand the available options. What does the lender offer? Does the loan meet your needs? As you choose, you should consider the interest rates, the loan amount, and the repayment period too.

Step 4: Find a Lender

Many lenders offer SBA loans. A large number of lenders may easily overwhelm you if you are not keen. That’s why financial experts advise borrowers to take their time when looking for a lender, even when the financial need is quite pressing.

You can either search on your own or find a referral service. The referral services offer a list of the available lenders and compare the features to help borrowers choose the best. However, the referral firms might charge a small fee, which you should always be aware of before committing.

Here are the important considerations to observe when finding a great lender for your SBA loan:

• Check if the lender offers the exact SBA loan program you need

• Check the minimum amount that the lender offers

• Look at the eligibility requirements and ensure that you meet them

• Consider the interest rates- if possible, compare the rates offered by different lenders to get the most affordable

• Ask about the down payments- some lenders require the borrowers to pay down payments before applying for the loan

• Check the disbursement period

Lastly, consider customer service. The best lender should have a great customer care team to provide the best customer service. You might check the review and references too to know the firm's reputation and customer service.

Step 5: Prepare Your Paperwork

Assuming you now have a specific lender in mind, you should prepare the right paperwork required for the application. Your lender should give you a list of all the things you should have before you apply.

Here are some of the vital documents that you must provide to get an SBA loan quickly:

• Your business licenses and permits

• Your business plan- it should show how you will use the loan

• Your personal documents such as the national identification number and so on

• Your current balance sheet as well as the P&L accounts

• Your tax returns forms

• Proof of business ownership

Do not forge documents. Lenders conduct strict scrutiny to determine the truth in the documents you provide. 

Step 6: Fill Out the Application Form

Having provided the documents and met the other eligibility requirements, you can now fill out the application form. The form should indicate all the relevant information regarding SBA loans. For instance, it should state the interest, the amount, repayments, and other terms.

Read the information carefully to avoid making mistakes. If possible, find someone to help you translate the information for easier understanding. Here are a few rules to observe when applying:

• Avoid spelling or grammar mistakes

• Provide the correct information

• Don’t sign/ fill in any information if you don’t agree to the lending terms and conditions

• Submit the applications at the right time

You can either submit your application online or offline according to your lender's preferences.

Seek Professional Guidance on How to Get an SBA Loan

The SBA loan application may be overwhelming to an entrepreneur who has never applied for another loan before. If this is your case, then you should seek professional help.

A great lender or business broker will help you know how to get an SBA loan quickly and guide you through the business acquisition journey.

BizNexus is your resource for connecting with opportunities and the professionals who can help you get your acquisition financed. The platform helps entrepreneurs acquire new businesses, buy a new franchise, and connect with the right professionals to help sell their businesses. 

Intermediaries on our platform routinely advise entrepreneurs on their available options to help them make the best decisions. If you plan to buy or sell a business, get started by logging into your free BizNexus account to get matched with the right professionals to help.

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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.

What's a "SPAC" and why are these things so hot right now?

How SPACs Work

Otherwise known as “blank check companies,” these things have become HOT models in 2020 and since the onset of the pandemic.

Source: Yahoo Finance

How it works:

1. You give me a pile of money

2. I can go out into the market and spend it on whatever company I like

What’s the catch?

Check the overview video to learn more:

Related articles you might be interested in…

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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.

Big Tech Acquisitions - How to Grow Through a Pandemic

CORONA Activated Big Tech To Go On A Buying Spree

Unless you’ve killed your TV, cut the cable, or have taken a break entirely from social media and all things internet over the past few months (completely understandable and no criticism from our end if that’s the case), it’s not new news to tell you big tech has been on a rampage of acquisitions since the outbreak of the pandemic.

Startups that never prioritized profitability (or simply didn’t have the chance to get there before the pandemic hit) are flailing, layoffs and pay cuts became the norm in Spring 2020, and the larger companies with access to capital found themselves in a once-in-a-lifetime position to take advantage of a downturn like this a very real growth and expansion opportunity.

We’ve had a ton of early-to-mid-stage startups go up on the BizNexus platform this year as newly available acquisition opportunities, but if you’re interested in a complete list of all of Big Tech’s acquisitions since the Covid-19 outbreak, check out CB Insights 64 page report on the industries & technologies that will shape the post-virus world:

If you’re interested in acquiring some tech opportunities of your own, be sure you’ve set up “saved searches” for that on the BizNexus platform and we’ll match you with those opportunities as they become available as auction or pre-CIM opportunities.

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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.

CVBBA Webinar: Deal Origination in a Post-COVID World

Deal Origination In A Post-COVID World

In this webinar hosted by CVBBA President Neal Isaacs, Adam Ray (Founder and CEO of BizNexus) shares his thoughts on the state of deal origination in a post-COVID world. He covers some key shifts in the deal origination space, including the reactions of central industry players like private equity & strategic acquirers as well as individual buyers and sellers, and changes in the way technology is used to get deals done. He also elaborates on the changing nature of the deal process itself and what business brokers should do to position themselves for success.

See the full interview here:

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Search Fund Model Diversifies Away From MBA

The Search Fund Model

-Very interesting article recently on Entrepreneur highlighting recent private equity trends and the increasing appetites of family offices for the traditional search fund model. Towards the end of the article, Atta Tarki begins to address an issue that I wish he went more deeply into (hopefully your next article Atta?): The fact that more entrepreneurs who don’t fit the traditional mold of the recently graduated MBA with investment banking or private equity experience are getting into the search fund game.

In the early 2000s, 50 percent of searchers would start their search within a year of graduating from an MBA program, but that number now has dropped down to 25 percent. At the time it was also incredibly rare for searchers to not have gone to business school at all, but 19 percent of searchers now ….. start a search without getting an MBA.

What is Search Fund?

When I first engaged with the search fund model back in 2007, it was still a relatively unknown, inaccessible model. The idea of backing an inexperienced, newly minted MBA to identify, acquire and run one company was insane to most investors outside of a small group of tightly knit investors known as the “search fund mafia.” For the entrepreneur, being limited to such a small pool of tightly knit investors put the aspiring searchers at a very clear disadvantage when it came to negotiating terms, or simply having enough capital out there to back this type of investment for a growing community of aspiring ETA entrepreneurs.

Why Entrepreneurship Through Acquisition?

Family offices, and the explosion of interest in entrepreneurship through acquisition over the past decade, have changed everything, and it’s great to see the pool of investors getting deeper with each passing year as more investors become familiar with the model (and with the returns typically associated with the search fund model).

Something to note here: -One grievance I still have with the general discourse out there when it comes to the discussion of this specific ETA model is that everybody loves to rave about the great returns on investment, but the data referenced is typically for the investors, -not the entrepreneur. I’m not trying to say the search fund model isn’t a great model for the entrepreneur as well as the investor, -it is. But to hit it big as an entrepreneur with the way the search fund investment is typically structured, the search funder more often than not really has to knock it out of the park with the traditional time + performance-based equity model and liquidation rights associated with search fund investments.

For me personally, I ultimately wound up pivoting mid-search away from the typical search fund target in lieu of less proven opportunities and eventually acquired a larger piece of equity in a smaller deal that had had some clear P&L mismanagement leading up to my acquisition. Seven years later, with the help of my investors, we got that company to a point where it was ready for a viable exit.

Final Take on The Search Fund Model

The search fund model presents an amazing opportunity for the motivated entrepreneur, but it can also be a sort of acquisition gateway drug for newly aspiring ETA enthusiasts, ultimately leading to other forms of acquisition entrepreneurship, -like tapping the SBA for up an acquisition loan up to $5 million to buy a small business on your own, and focusing negotiations on seller financing and earnouts, particularly in this new environment. search fund investments

Hand picket for you - read on…

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Bloomberg Interview with Sam Zell on Market Valuations & Post-Virus Economy

Sam Zell On Market Valuations

Sam Zell’s take on where we are currently in terms of investment & acquisition opportunities as of the beginning of May 2020. Basically, buyers are looking for discounts and sellers haven’t let go of the pricing expectations that existed just a couple of months ago. Until those expectations move closer together, and until the uncertainty clears up, we’re in “wait and see” mode.

See the full interview here:

Hand picket for you - read on…

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How to Finance a Business Acquisition

Financing a Business Acquisition

Learn about ways to finance a business acquisition

Are you considering different ways to finance a business acquisition? Read through to learn more about how to finance a business purchase.

Finance a Business Acquisition

Are you an entrepreneur? Are you considering a business acquisition loan?

Unlike a startup venture, you won't be starting a business from scratch. In fact, the business acquisition allows you to enter into new markets with a brand that is already established. It will give you access to resources, competencies, and experts that you do not currently have, but that will prove invaluable to business growth in the future.

One issue that acquisition presents, however, is financing. 

Where do you get the funds to finance a business purchase, and do you qualify for this capital?

Let's take a look.

1. Borrow From Yourself

The best way to avoid putting your business or property at risk if it fails is to use your own funds to purchase it. Few entrepreneurs, however, acquire businesses using only their own funds. 

Your savings are a great way to start. If, however, you do not have the funds, you can take out a loan from your 401K.

The IRS will allow you to take out a loan of up to 50% of your 401K. The loan must get repaid with interest within five years. If you don't pay back the loan, it will be considered defaulted and you will have to pay taxes on it. 

2. SBA Loan

A Small Business Administration Loan is a popular way to finance a business purchase. While the Administration itself doesn't finance the purchase, it provides guarantees and safety measures for the lenders who will fund your acquisition.

You will need good credit to qualify for an SBA loan. And you should expect to put around 20% down. 

If you qualify, however, SBA loans have definite advantages. These include low interest rates and long repayment terms. 

3. Seller Financing

Sometimes, the seller of the business can lend you money that you can pay back over time. The advantage of this for buyers is that you can get quicker access to financing, as well as lower financing costs. Sellers hope that it will attract more buyers and help them make more money.

How to Finance a Business Acquisition

Get Financing

4. Bank Loans

A traditional bank loan can be difficult to secure for a business purchase. You may, however, be able to secure excellent rates if you have the right credentials.

Banks will look closely at your financial history. They will also look carefully into the financial history of the business you wish to purchase. You will need substantial assets, an excellent credit history, and a good track record in your industry.

5. Peer-to-Peer Loans

Peer-to-peer, or P2P, business lending allows investors to lend to business owners in an online marketplace, or from their personal networks. In order for them to take a chance on you, however, it helps to have solid experience in your industry.

Financing A Business Acquisition

A business acquisition is a tremendously exciting adventure. With the right financing, you could be running a successful enterprise in no time.

For more information on business purchases, read more of our blog today. 

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Buy a Small Business for Sale Instead of Starting From Scratch

Don’t Start a Business From Scratch

Buy one instead

Being a smart entrepreneur is more than starting a business. Read on to learn how it's better to buy a small business for sale instead of starting one from scratch.

Small business for sale by owner

What if you could own a new business overnight?

The mindset of entrepreneurs often focuses on building a business from the ground up. However, you're actually far better off finding a small business for sale by the owner instead of starting a brand new business from scratch.

Wondering why you shouldn't start from scratch? Here's our complete guide to buying the best small business to start.

The Time Is Right

You could buy an established business for sale at any time. So, why is now the best time to get started?

Many businesses are owned by Baby Boomers. And a whopping 10,000 Boomers are retiring each day!

Baby Boomer business owners retiring are motivated sellers who will be happy to see their brand continue. And with so many pondering retirements, you'll have a selection of businesses to choose from.

Easy Business Financing

The biggest obstacle to starting a business from scratch is financing. Banks are understandably hesitant to fund an unproven idea, especially during a tumultuous economy.

However, they are likelier to provide financing for an established business. After all, such a business has already proven itself with the sweet smell of success within the local community.

Honestly, avoiding financing headaches is one of the best reasons to scoop up an existing business!

Easy Instant Profits

Starting a new business is always a calculated risk. Smart entrepreneurs must be prepared to deal with even years of waiting before profit is generated. And, of course, it may never actually turn a profit.

When you buy an existing business for sale, though, you start pulling down real income from the very beginning. The math on this is simple: by purchasing a successful business, you can enjoy the sweet smell of success from day one!

With these instant profits, you can also engage in any renovations and innovations you've been dreaming of. And you can do so secure in the knowledge that your business is already a success.

Hit the Ground Running

In addition to being a proven brand, part of what makes your best small business to purchase a success is that you can hit the ground running.

That's because you didn't just buy a building and its equipment. You also bought a robust network of contacts. And you have access to trained and skilled employees who helped make the brand a success.

Why go through the headache of building something brand new when you can own a proven business model right away? And there's always room for expansion later on.

Less Work, More Instant Profit

The final reason to purchase a small business for sale by the owner can be summed up in 4 words: "less work, more instant profit."

You get to skip all those sleepless nights and endless paperwork that comes from starting a new business. And you also get to skip the difficult task of hiring the right employees.

Instead, you get to jump right into a great brand and a successful staff. Your only challenge? To make this the best small business to start as big as your ambitions!

Small Business for Sale: Your Future Awaits

Now you know why you should buy a small business for sale. But do you know where to find the best businesses just waiting for you?

We specialize in linking ambitious buyers with motivated sellers. To start your small business big dreams, check out our small businesses for sale by owner today!

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Ultimate Guide to Buying a Small Business For Sale

Ultimate Guide

To Buying a Small Business For Sale

Buying a small business for sale can be a complicated process. This ultimate guide will get you started on your way to owning a flourishing small business.

Buying a small business for sale

So you've always wanted to be a famous entrepreneur, and you've decided that it's time to turn your dream into reality by acquiring a small business for sale.

Congratulations!

That can be an incredibly fulfilling and smart business decision to make, but of course, buying a small business enterprise isn't a simple process.

There's a lot to think about, especially during the initial stage of this entrepreneurial adventure program of yours. Keep reading and learn how to value an existing business!

How to Choose A Good Business To Buy

Finding a good business to acquire is about asking yourself and the business seller a series of questions.

Firstly, you need to understand:

• If you feel passionate about the business

• If you have the expertise to take on the business and, if not, how you can obtain the necessary skills

• If you can afford the business and if not, whether you should apply for a loan or start a search fund

If after considering these factors, you still want to buy the business, it's time to talk to the business seller. A few things you can't forget to ask them are:

• "Why is the small business for sale?"

• "Are the revenues increasing or decreasing? Why?"

• "What is the small business marketing strategy put in place?"

• "What are business liabilities that you are facing?"

• "Will I need any specific small business licenses?"

• "Has the business been involved in any legal issues?"

Based on the answers to these and other questions, you should make a realistic decision that won't end up putting you in a difficult business situation.

Remember, as much as you might love the idea of the business, if it doesn't seem like it could work long-term, it's probably best that you reconsider.

Buy a Business

6 critical questions to ask sellers

Learn More

How to Value an Existing Business

Eventually, you'll find a small business enterprise you feel passionate about and that seems to be a good investment in 2020. Once you do, the next step is to value the business: to understand how much it is really worth.

This is something you should always do, as the business seller financing might suggest a price that is in fact too high for what you're acquiring.

There are several ways of valuing a business, such as calculating its net worth or its value based on capitalized future earnings. The most important thing is to guarantee that you consider both tangible and intangible assets as well as calculating intangible assets amortization.

To make this step easier, you can always use an online business value calculator. 

Buying a Small Business Enterprise

When you find a good small business enterprise for a fair price, you'll be ready to take the leap and acquire the business enterprise!

To do so, you'll need to get all the documentation in order: the financial documents, any necessary licenses, the contracts, and agreements. It's important that you have it all organized so that you ensure you're doing things properly.

Once everything is taken care of... it's time to get to work!

Ready to Become a Famous Entrepreneur?

Now that you know all the basics of buying a small business for sale, you're ready to start looking for the right one and finally become the entrepreneur you've always wanted to be.

Here at BizNexus, we match buyers with acquisition opportunities according to their acquisition preferences and niche saved searches. If you'd like a hand finding the perfect business for you, sign up and let us know what you're looking for!

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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.

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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.

BizNexus -Learn More From Our YouTube Playlist:

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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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?

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. 

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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.

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

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

How to Get a Loan to Buy a Business

Want to buy a business

Here is how to get a loan

Are you worried about your lack of capital? Many successful businesses started with a loan. Get a loan to buy a business with these simple steps.

Loan to buy a business

Only 80 percent of small businesses survive the first year. After that, things get even worse. Only half of the small businesses pass the five-year mark.

Are you an entrepreneur wanting to own your own business but are afraid of failing? There's a solution!

Buying an existing business is a great way to increase your chances of success. And if you're worried about getting a loan to buy a business, we have the tips for you.

Keep reading to learn more about your options for financing your new business. 

Bank Loans

If you have a great credit score and can show a history of strong financials for the business you want to purchase, you'll probably qualify for a bank loan. Many banks offer their own loans and even small business administration (SBA) loans that are backed by the government.

If the company has a good history and a positive outlook, you may qualify for a loan with a low interest rate. However, bank loans aren't always the best choice. They can be time-consuming and often require you to make a deposit as collateral. 

Credit Union Loans

Credit unions are not for profit and are owned and control by their members. This means they often have lower interest rates and fees as well as more flexible lending requirements.

They tend to have a more personal approach and aren't bound by a set of strict guidelines. 

Online Business Loans

Prospective business owners can choose from many different options when it comes to online business loans. Online lenders offer a fast and convenient application process and tend to have higher approval rates than traditional lenders.

Be sure to compare rates and terms carefully to avoid getting stuck with a high interest rate.

Online Personal Loans

Personal loans can also be used to finance business ventures but it's important to shop around. While going this route can get you funding quickly, not all personal loan lenders will let you use the funds for business purposes. 

Seller Financing

If you don't want to get a loan from a third party, you may be able to make arrangements with the seller of the business. They will act as a lender and you can make payments to them for their business in installments.

Sometimes the seller will even finance part of the sale price. With this sort of arrangement, you can pay as you go. This can make managing your budget and cash flow much easier. 

Looking for a Loan to Buy a Business?

Starting your own business can be one of the most rewarding yet scary ventures you'll ever make. You can go into the process with more confidence and less risk by buying an existing business.

If you looking for a loan to buy a business, we are here for you. We help entrepreneurs buy existing businesses.

Click here to learn more about funding your new business. 

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