So you want to buy a business, heh!!!

Posted by: Fernando Simo

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So you made the decision to buy a business.  Now what??  Well, to begin with, I would recommend you get the services of a business broker to help you find the right business—it is FREE.   Just like in the real estate market, brokers get paid a commission from the seller not the buyer AND, in most cases, the broker represents the transaction—where he is not an agent of either the seller or the buyer.   Secondly, I would really give a lot of thought as to why I am buying a business.  Do you need to or do you desire to buy a business?  In today’s economy many buyers NEED to buy a business to replace a job (Note: Most of those looking to get a visa REALLY are replacing the jobs they had in their country of origin).    Buyers who desire to buy a business normally spend fruitless hours—and those of the broker-- looking for the perfect business to buy, to no avail.

Buyers should consider the following areas, as well:

1. What are you looking to invest?  One should understand that the equity used to purchase a business IS NOT the only equity required.  In many cases, a significant work in capital amount is required to begin running the operations of the business effectively—marketing, distribution, inventory, additional fixed assets, etc.
2. Where are the funds you want to invest?   Are they coming from 401K’s, SBA loans, Home Equity Lines of Credit?  There may be restrictions as to how to use some of these funds.
3. Based on your life style, how much income do you need to maintain it, after debt service and taxes?  Please keep in mind that most businesses sell at 2-3 times its owners benefit.  So that if you need $100K to maintain your life style, you are looking to buy a business in the range of $200-300K.
4. How many hours per week are you willing to work?
5. Are other family members to be working the business with you?
6. What industry am I willing to work in?
7. Where am I willing to have this business geographically?
8. Do I have the licenses required to run this business?
9. Am I willing to provide a personal guarantee on any notes provided by the seller?
10. Is my credit good enough to get a lease agreement/assignment?

An understanding of what it is that you want/require when buying a business is critical PRIOR to going through the process of buying.  Most good brokers will help you determine your viability to buy a business.   Once you know what it is that you are looking for, the broker can help you get there quickly and efficiently.

Should you want to know more about selling or buying a business, please contact me, Fernando Simo, at 407-361-8886 and/or visit my webpage at www.bizbuyorsellflorida.com