As we move into the golden years, something happens to many of us (yes, it happened to me)—we want to become entrepreneurs!  I think that the need to protect the financial viability of the rest of our life, force us into thinking that the only way we can effectively do so is by investing in a business of our own.   Please, think it over.  More often than not, we lose a significant amount of our life savings, if not all of it.  We foolishly use our 401K, the equity in our homes, etc. to fulfill the entrepreneurial dream: Financial Security and independence.

So, here is my two cents on this subject.    

1.                  Experience.  Please do not buy a business unless you do have some level of experience running this business. 

2.                  Investment.  Your total investment should be less than 20% of the amount you have in savings.  If you must borrow from a commercial bank or any other source, stay away from personal guarantees—easier said than done!

3.                  Business Model.  The easier the business model, the greater your chances of success.  Stay away from complicated models, such as restaurants, where you handle inventories, people issues, the health department, and a significant amount of overhead.  There are many businesses out there with low overhead and ease of management--Normally in the service industry.  Select those!!  By the way, although the business may be, a franchise system IS NOT a simple Business Model.   The only one benefiting from a franchise system is the franchisor.  The franchisees find themselves paying up to 10% of the net revenues of the company (royalties plus advertising and others) while struggling to make ends meet.

4.                  Run it.  Absentee ownership does not work.  If you must buy a business, make sure that you are the owner-operator of the business.   A business ran by an absentee owner may be losing money through understated revenues and inflated expenses.

5.                  Prepare a Financial Plan.  Know about the good, the bad and the ugly of the business.  Use assumptions indicating the best and worse outcomes and develop an exit strategy to get out of it.

6.                  Use Professional Advice.  Use lawyers to help you through the myriad of contracts and agreements you may sign and accountants/business consultants to help you decipher the financial requirements.    Additionally, get independent advice from a business broker prior to buying your business.

7.                  Work.  Are you willing to work 24/7?  As an owner, you may be required to do so.

As you enter into your golden years, you just may be happier getting the 5-10% earnings you may get from your investment savings.  Enough said.

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

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