What To Look For When You Want To Buy a Business, Improve it and Sell It For A Profit.
When you decide to begin looking for a business, You Need to Know What To Look For.
If you don’t, you run the risk of being taken advantage of, getting ripped off, losing a bunch of
money, and really having a bad experience
Below is a list of 8 things you need to know so you can quickly determine whether or not the business is worthy of your time to look at any further.
“What To Look For Buying A Business”
1. Does the business have repeat customers?
Does it survive despite itself? Is the business making money despite current operations?
Does it have repeat business and customers?Repeat customers are a big deal – because it equals profits.
It means whatever they are selling, people like it and at a quick glance, you will probably see a little marketing savvy, you can make the business explode.
Has it survived for a while despite poor service and bad attitudes from its owners and employees?
If so, you have a winner and all you need to do is get in there, change a few things and watch the money start pouring in.
2. Does it Generate Cash Flow?
Buy businesses for cash flow, and leave the real estate to real estate investors. You’re looking for cash flow not depreciation.
However, if the business you are looking at has real estate attached, you might be able to do a “Vertical Breakup” and sell off the real estate to an investor, raise cash and then fix the business and sell it separately.
3. Can It Be Run With Low Skills?
You’re looking for a simple business that sells things people want to buy – and are buying. Most entrepreneurs don’t want a professional practice such as an accounting firm, a law practice, or any business that requires huge investments of highly technical training or skills to run it.
Can you imagine being the boss of a bunch of attorneys or accountants and you don’t have a degree in it? With the ego’s involved, you would be asking for problems.
4. How Are The Sales And Marketing Efforts?
Poor marketing is a good sign of and excellent opportunity.Most business owners are completely clueless about marketing because they are too busy working in the business all day and focused on surviving.
You need to implement marketing systems to get the phone ringing and sales always increase with a ringing phone!
One would think this is common sense, but once you begin looking, you will see it is quite common there is little or no marketing going on in most business that go up for sale.
It is one of the first things the seller cuts back on way before they come to the decision to sell. (It is also where you will find the “Off-Balance-Sheet-Assets” I teach my students and coaching members about and where to look).
5. Can The Business Be Run By a Jockey?
Can you easily train a manager to go in and run the systems you put in place? Can you move one of employees into management?
Chances are, there are one or more employees that know a lot more about the business than you do and they would be thrilled to share their ideas with you and “show their stuff.”
When you put good people in management, good things happen. It gives you the ability to devote more time on marketing and promotions, which is paramount to increasing sales so you can make more money.
6. Does It Have A Big Upside?
Look at the numbers. How much is the current owner pulling out of the business with salary and other seller owner benefits?
Is it a business that is making $3,000 per month and can rapidly be increased to $10,000 per month?
The ABOD (Annual Business Operating Data) I developed is a quick and easy way to run through the numbers so you can quickly determine exactly how much the seller is pulling out of the company.
It also automatically identifies the ratio of expenses so you can compare them to industry norms so you can prioritize needed operational changes.
The ABOD is a “Must-Have” Tool.
7. Is It A Fair Deal?
Don’t fall in love with the business. Fall in love with the deal.
Remember- your make money when you buy, then you increase the profit and create cash flow while you own, and you “Cash-Out” when you sell.
There are more deals out there than you can possibly imagine and every single day more business owners wake up and decide to sell their business for one reason or another.
All you need to do is fine one, negotiate a “Fair and Reasonable” price and a win/win scenario that benefits both you and the seller.
You get a good deal, and the sellers gets out owning a business they are tired of running for whatever reason.
Would you like to learn how to buy a business so you can become an entrepreneur and experience the personal freedoms of being in business for yourself?
I can show you how to buy businesses even if you have zero experience and no idea where to start.
To learn more, please feel free to Contact Me.