How To Buy A Business Leaked Bonus Chapter

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  1. 1. BusinessBrokerageSecretsRevealed.com PresentsPRELAUNCHSEQUENCEOF HowtobuyaBusinessandSella Businesssuccessfully TrainingPackage ExclusiveLeakedBonusChapter Presentedby L&KBusinessBrokers Brooklyn,N.Y.11242BusinessBrokerageSecretsRevealed.com
  2. 2. TheAbsoluteSimplestGuidesonHowToBuya BusinessSuccessfullyTrainingPackage Itshouldcomeasnosurprise,thatmoreoftenthannotfirsttimebusiness buyersenterintotransactionsatadefinitedisadvantage.Thereareseveral factorsthatcontributetothispredicament.Thefirstthingthepotential buyershouldknowisthatsellersarenotabovetellingliesifitmeansclosing thedeal.Mostsellersknowtheycantakeadvantageofaninexperienced buyerbyhidingfactsthat,ifrevealed,wouldnegateapendingsale.Notto mentionthefactthatbusinessbrokersthatworkonthelistingsidetendto favortheselleroverthebuyer.So,ifyourgoalistosomedayowna profitable,ongoingbusiness,thenitshouldbeworthalittlebitofyourtime togetafewtipstolearnhowtoavoidthecommonpitfallsthatmost inexperiencedbuyermake. Theinformationcontainedinthisbookisgearedexclusivelyforbuyers. Compiledfromdirectobservationsmadeovermanyyearsofdirectfirst handexperiencerelatingtothebuyingandsellingofongoingbusinesses.BusinessBrokerageSecretsRevealed.com
  3. 3. ThematerialofferedwillbepresentedinasimpleandeasytounderstandQuestion&Answerformatsothatbuyersandsellers,regardlessoftheirlevelofexperience,canenterintoanytransactiononalevelplayingfield.Someofthetopicsthatwillbecoveredare:1)Theimportanceoflearningtherealreasonthesellerwantstogetridofhisbusiness;2);Makingsuretokeepyouremotionsoutoftheequationandnotletenthusiasmforabusinessdisplacecommonsense;3)Howtomakearealisticassessmentofthesellersbusinesssavvy;4)Howtoknowifthefinancialstatementspresentedgiveatrueandaccurateportraitofthebusinessbeingofferedforsale;5)Determiningtherealmarketvalueofassetsandinventory;6)Howtonegotiatealowerpriceifyoudeterminetheaskingpriceis inflated;7)Howtoanalyzecurrentdatainvolvingwebtraffictopredictfuture relevanttrendsthatcouldaffectthebusinessinquestion;BusinessBrokerageSecretsRevealed.com
  4. 4. 8)Howtogetthemostoutofthebusinessbrokerwithoutgivingawaytoo muchofyourstrategyand9)Learningaboutalternativemeanstofacilitatethetransaction.Inthisway youwillknowhowandwheretolookforhelpwhenconsideringpurchasinga business.Butkeepinmindthattheinformationcontainedinthisbookshouldnotberegardedaseitherlegalorfinancialadvice.Asyoureadthroughthisbook,keepinmindthatthematerialpresentedshouldberegardedsolelyasaninformedopinion.Furthermore,theauthorcautionsthereaderthathedoesnotassumeanyresponsibilityforerrorsandomissionsconcerningtheinformationcontainedinthisbook,oranydifferingconclusionsdrawnfromthesubjectmatter. CHAPTER1:HowToKnowTheRightTimetoBuyABusiness? Buyingabusinessrequirestheabilitytomakecomplexdecisionswithouttheaddedinfluencesoffearandemotionalexcitement.Ifthisisyourfirsttimecontemplatingthepurchaseofanongoingbusiness,it'sverytemptingtothinkofwhatyourlifewouldbelikeifsuddenlyyouweretheboss.ThereisacertainsenseoffreedomthatcomeswithowningyourownBusinessBrokerageSecretsRevealed.com
  5. 5. businessbecauseyourealizethatyouwillbemakingmoneyforyourselfratherthanforsomeoneelse.Yet,youcanthelpwonderingifthebusinessreallyhastheabilitytomakemoney;andtheresfinancingthepurchaseandcapitalizingyourbusinesstoconsider;nottomentionworryingwhetherornotyoupaidtoomuch.Theseareallperfectlynormalresponses.However,alotisridingonthedecisionsyouultimatelymake.Andifyourelikemostpeoplethestakesaretoohightomakeamistake. Ifyoucouldpredictwhatsgoingtohappentomorrow,thentherewouldbenothingtoworryabout.Butweallknowthatwonthappen.Sothenextbestthingistogo intoeachandeverytransactionarmedwiththerightknowledge.Thatway,atleast, youcanmitigateyourchancesoffailureandtakethefirststepincontrollingyour owndestiny. Inbusiness,asinlife,timingiseverything.So,onceyoufeelthatyouare readytopurchaseanongoingbusiness,thefirststepistodecideonthetype ofbusinessyouintendtobuy.Therewillalwaysbemanybusinessesto BusinessBrokerageSecretsRevealed.com
  6. 6. choosefromatanygiventime,butagoodruleofthumbistogowithwhat youknow.Youmaybefamiliarwithaparticularbusinessbecauseafriendor familymemberownssomethingsimilar.Butisthattherightchoiceforyou?Manyfactorsshouldgointoyourdecision.Thefollowinglistisjustasmall samplingofthekindofquestionsyoushouldaskyourself: Howmanyemployeeswillberequiredtomaintainthebusiness? Areyouuptothephysicaldemandsofthejob? Canyouhandletheaddedworkload? Doesthejobrequirealotoftravel? Areyougoodatinteractingwithcustomers? AmIcapableofmanagingmystaff? Eachbusinesswillpresentauniquesetofquestions.Andthewayyou answerthosequestionswillgiveyouanindicationifthebusinessistherightfitforyou.Butintheend,thedecisionboilsdowntoonebasicquestion: Couldyouseeyourselfbeinghappyoperatingthisbusinessafewyearsdown theline.AnswerYesandthismaybetherightbusinessforyou(solongas therestofthecriteriayoucheckoutmakessense).AnswerNoanditsagoodbetthatyoubetterstartlookingatsomethingelse.Remembertokeepanopenmindwhenyoulookatdifferentbusinesses. DontbecomesosetonabuyingaparticulartypeofbusinessthatyoufailtoBusinessBrokerageSecretsRevealed.com
  7. 7. consideradifferentbusiness,inyourpricerange,thatproducesthetypeofincome thatyourelookingfor.Statisticsindicatethatoverhalfthebuyersinthemarket endupowningabusinessinacategorydifferentthantheonetheyinitially considered. Onceyouknowwhatkindofbusinessyouwanttoown,thenextstepisto figureoutthesizeofthebusinessyoushouldbuy.Thisisdeterminedbythe amountofmoneyyouhavetoinvest.Typically,thedownpaymentneeded forbuyingabusinessrangesfromapproximately20%to50%ofthepurchaseprice. Lookingatahypotheticalscenarioassumingthatyoufeelcomfortable investing$50,000forthepurchaseofanexistingbusinesswecangeta betterideaoftheprinciplesatworkindecidingonthesizeofthebusiness youareinthemarketfor.Afterdeducting20%forworkingcapital,youwill have$40,000toofferasadownpayment.Consideringdownpayment requirements,themaximumpricerangeyoushouldbelookingatwilltopout at$200,000.Goingwithanaveragedownpaymentof30%themaximum purchasepricewouldbecloserto$130,000. BusinessBrokerageSecretsRevealed.com
  8. 8. Nowyouvegotahandleonthesizeofthebusinessyoushouldbelooking for,andonceyoustartcheckingwhatsavailable,youllfindthatthereare manybusinessesforsale,inthispricerange,thatwillbeabletoproducea reasonableprofitfortheirowners. Yourereadytobuysomething;andyouknowthesizeofthebusinessyou canafford;thenextstepisfindingtherightbusiness.Agoodplacetostart yoursearchisontheInternet.Closeto90%ofbusinessbrokerslisttheir inventoryonline. Youcanbecertainthatifyousearchonallbusinessbrokeragesites,therell beahighpercentageofoverlap.Butoftenyoumaybeabletofindbusinesses listedforsaleontheseothersitesthatarenotlistedonasitesuchaswww.bizbuysell.com. ButdontstopattheInternet.Otherwaystofindbusinessesforsaleinclude networkingwithfriendsandrelatives,andcontactinglocalbusiness professionalsattorneys,accountants,andbankers,etc.Then,onceyouseea businessthatmeetsyourcriteria,contactthebrokerofferingthelistingin ordertogetmoredetails.Whendoingyourpreliminaryresearchthemore BusinessBrokerageSecretsRevealed.com
  9. 9. informationyoucangetregardingaparticularbusiness,thebetter. Afteryouveidentifiedthebusinessthatyouwouldliketopurchase,thenext stepistogetyourfinancinginorder.Thefirststopformostpeopleseekinga loantobuyabusinessisgenerallytheirlocalbank.However,typicallybanks arenoteagertomakebusinessacquisitionloans.Inmostinstancestheywill findsomereasontodeclinetheloanapplication.Lessthan10%ofnewbusinessownerssecuretheirfinancingthroughbanks. Oftenthesolutionrestsonafamilymember,typicallyanelderinafamilywill lendthedownpayment,orinsomecasestheentireamountneeded,toa promisingmemberofthefamily'syoungergeneration. Insomecases,TheSmallBusinessAdministration(SBA)anagencyofthe Federalgovernmentisabletoprovideforbusinessacquisitionloans throughitsnetworkofapprovedlenders.ThisprogramisknownastheSBA 7(a)program.TheSBAgenerallydoesnotmakedirectloans,butratherthe agencyguaranteestheloanmadethruanapprovedlender. Althoughitmaynotbeanoptioninallcases,onoccasion,theownerofthebusinessyouwishtobuymayfinanceaportionofthepurchasepriceforthebuyer.WhileBusinessBrokerageSecretsRevealed.com
  10. 10. somesellersarenotinafinancialpositiontoofferownerfinancing,whenaselleris willingandable,itisaconvenientwaytosolvetheproblemoffinancing. Twootherpossiblesourcesforthedownpaymentandworkingcapitalareto borrowmoneyfromyour401Korfromtheequityinyourhome. Presumingthatyouvemadeitthisfar,thenextstepistoanalyzethe business.Remember,confidentialityiscriticaltothesuccessfultransferofa business.Ifwordgetsoutthatabusinessisforsale,severalthingsmay happenasaresult.First,keyemployeesmaystartlookingforotherjobs fearingthatanewownermaynotretainthem.Also,customersmaybegin shoppingelsewhere.Andevensuppliersmaystartgettingnervous.Allinall, noneofthesethingsarebeneficialtoaprospectivebuyer.Thisiswhy,inall likelihoodthebrokerwillaskyoutosignanondisclosureagreementstating thatyouwillnotdisclosethefactthatthebusinessisforsaleexcepttoyourprofessionaladvisors. Ifyoureworkingwithabusinessbroker,generallyhewillprovideyouwitha onepagefactsheet(orprofile)onthebusinessthatyouareinterestedin BusinessBrokerageSecretsRevealed.com
  11. 11. purchasing.Thisinitialprofilewillsummarizeallthesalientpointsofthe businessincludinggrossrevenueandownerscashflow.Asnegotiations progressyoumayrequestorbegivenadditionalinformationfromtheowner orbrokerregardingvariousaspectsofthebusiness. Usingthebrokerprovidedfactsheet,oneofthemostimportantthingsto consideristheoperationsannualcashflow.Because,afterallissaidand done,whenyoupurchaseabusinesswhatyourereallybuyingistheability ofthatbusinesstoproducecash.Theamountofcashleftoverafter deductingallexpensesnecessarytorunthebusinessfromthetotalrevenue isconsideredcashflowandisagoodindicatorofthefinancialhealthofa specificbusiness.Cashflowisavailabletothebusinessownertopayany debtsincurredwhenheboughtthebusinessandforhisownpersonaluse. Manypeopletendtoconfusecashflowwithnetprofit(asreflectedona businessesannualincometaxreturn). Inanefforttoreducetheirtaxableincome,mostbusinessownersallocate someexpensesthroughthebusinessthatarenot,bydefinition,purely businessexpenses.Taxliabilitymaybereducedbythispractice,butitmay BusinessBrokerageSecretsRevealed.com
  12. 12. alsoobscurethetrueearningsgeneratedbyabusiness.Atsomepointthebusinessbrokerwillsetupameetingbetweenthebuyer andseller.Oddsarethebrokerwillbepresentatthemeetingtofacilitatethe exchangeofinformationandanswerquestions.Thisisnotapurelysocial gettogether;itisoneofthefinalstepsindeterminingwhethertogoforward.Bringalistofquestionsandfeelfreetoaskanythingyouwant.But remember,itsimportantthattheinitialmeetingremaininformalandcordial.Thisisthetimethatbothpartieswillhaveanopportunitytocheck eachotherout.Ifyouareseriousaboutgoingforward,beforeyouformalizeyouroffer,itis importanttofigureoutwhatthebusinessisworth.Youalreadyknowwhatthe brokersaskingpriceis;however,itsnowtimetodothemath.Onewayistohave anindependentappraisalmade.Certainsituations(suchaslargermergeracquisitions,largeloanapplications,managementperformancetracking,estate planning,divorceorpotentialIRSissues)requireaformalbusinessappraisal.Bearinmindthattheappraisalofprivatelyheldbusinessesisnotanexactscience.So beforeyougototheexpenseandtimeaproperappraisalwilltake,therearebasicBusinessBrokerageSecretsRevealed.com
  13. 13. economicguidelinesandrulesofthumbthatcanbeusedforaquickevaluationtoapproximatethevalueofabusiness: Value:asapercentageofannualrevenue: Almostallprivatelyheldbusinesseswithannualsalesunder$3millionwill sellintherangeof20%to80%ofannualrevenue.Determiningthepercentagein ordertocomeupwithalegitimatesellingpriceforaspecificbusinessdepends,in greatpart,onthetypeofbusinessunderconsideration.Conveniencestores representthelowendanddrycleanersareatthehighend. Value:asamultipleofCashFlow. Seekingtoapproximatethevalueofabusinessbyapplyingamultipletothe cashthatabusinessgeneratesisamorereliablemethod.Thisscenarioallowsforbusinessestosellforupto7timesCashFlow.Again,determining thefactorofmultiplicationdependsonthetypeofbusiness. Howeveryoudeterminethevalueofthebusinessyouwanttopurchase, rememberyouarethefinalarbiterofwhatabusinessisworthtoyou. Guidelinescannottakeintoaccountanyspecialconsiderationsorfuture plansthatanewownermighthaveforthebusiness.Whataparticular businessmightbeworthtoonepersonmightbecompletelydifferentto someoneelse. Astheprospectivebuyer,youwereaskedtomakecertainassumptionsbased ontheinformationprovidedtoyou.But,aspointedoutearlier,itisnot alwayseasytodetermineifthisinformationisaccurateorevenfactual.SotoBusinessBrokerageSecretsRevealed.com
  14. 14. protectyourselfagainsterrorsandomissionswhenyoumakeanoffertopurchasethebusinessbasedonthebusinessprofilebesuretoaddthefollowingcontingencycaveattothecontract:"Thisoffertopurchasesaid businessiscontingentuponbuyersinspectionofallthebooksandrecordsof thebusinessandthebuyerssatisfactionwiththeinformationcontainedtherein."[Makesuretheabovewordingisincludedverbatim.]Byadding thisexactwordingtothecontract,youarefullyprotectedagainstanymisrepresentations.Ifduringyourinspectionofthebooksandrecordsyoudiscoverthatthenumbersfurnishedwerenotcorrect,thenyouhavethe perfectlegalrighttoterminatethecontractandwalkawaywithnofurtherobligation.Andanyearnestmoneydeposit,heldintrust,shouldbe promptlyrefunded.Itisallpartoftheduediligencethatyoushouldperformbeforeclosingthedeal. Duediligenceislegalesefor"checkingthingsout".Inthisway,onceyouveverifiedtheaccuracyoftheinformationthatsbeenfurnishedandaresatisfiedthattherearenoserious,undisclosedproblemswiththebusiness,youhavedoneyourduediligence.YoushouldcheckwhateverappropriateBusinessBrokerageSecretsRevealed.com
  15. 15. sourcesnecessarytobecertaintherearenoundisclosedproblemsthatcould affectthebusinessinanadverseway.Someoftheareastoconsiderduringyourduediligencemayinvolvequestionsaboutkeyemployees;aswellaslegal,regulatory,andenvironmentalissues.Dontforgetaboutthelease. Youneedtobeawareofanyproblemsthatexistandmakesuretheyare handledtoyoursatisfactionbeforeyoupurchasethebusiness. Ofcourse,thereareotherpossiblecontingencies.Thewordingforthemmust alsobeincludedintheoffertopurchase.Butkeepinmindthattheowneris freetocountertheofferatsomefigurebetweenhisoriginalaskingpriceand yourinitialoffer.Atthispointyoucaneitheraccepthisofferorcontinueto negotiateuntilanumberisreachedthatisacceptabletobothparties.If everythingchecksout,youarereadytogototheclosingtable.Mostpeople findthistobetheeasieststep.Atthispointitshouldbeanobrainer.Youve alreadydoneallthework.Atclosingthepartiesdealwithanyoutstanding issuessuchastheproratingofrentandotherexpenses;theturningover keys;andthetimeandmethodbywhichtheemployeeswillbeinformedof thetransaction.Itscustomaryforthebuyerandsellertomutuallychooseaclosingagentandsplitthecosts.However,itisnotunusualforonepartytoBusinessBrokerageSecretsRevealed.com
  16. 16. insistonusinghisownlawyertohosttheclosing.B...

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