ForumsStarting a Business

Lark, Tell us more. What is your background?? is this business something that you have experience in??
How long has this business been in business?? Why are they selling??
Do you have an accountant?? Lawyer?? Have you seen prior year Tax Returns??
The more you share with us, the better we can help you.
LUCKIEST

Thanks for answering, lark. Do you have the FUNDS?? How about a Business and Marketing Plan??
Who has been in Business 1 year?? You or this company?? Do you have an Accountant?? Lawyer??
LUCKIEST

You will probably need some cash to do this deal. If this biz can be bought for 40-50% of value, the owner must be desperate to sell. Instead of 40-50%, perhaps it would work out better fro everyone to offer 65% (for example) of which only part is cash and part is stock in either the selling business or your current business. Sometimes "Ye have not because ye ask not." "Ask and yoiu shall receive".

I agree with Luckiest that SCORE or SBA is a good starting place for advice. SCORE also has online counselors from throughout the US, just a few key strokes away. SCORE.org.

There are several ways to buy an existing business and not have to put up any of your own money for the buy-out. Let me walk you through an overview of an actual transaction (I'll round the numbers to make it simpler to follow).

One of my funding sources sends out a monthly newsletter and recently sent a little news item on providing funding for the $300,000.00 purchase of a small manufacturing business.

Here is a financial summary of the business the buyer wanted to buy:

From their Balance Sheet -

• The business had $100,000.00 in accounts receivable.
• The business had about $200,000.00 in equipment.
• The business real estate was worth about $225,000.00.

Here is how those assets were used to come up with the purchase price to buy the business:

The buyer was able to use those assets in this way -

• The buyer sold the accounts receivable to a firm that buys receivables for $85,000.
• A funding source was able to lend the buyer $100,000.00 against the value of the equipment
• The funding source was able to lend the buyer $135,000.00 against the value of the real estate.

The total amount the funding source was able to provide the buyer was $320,000.00.

The purchase price was $300,000 and the buyer allocated the surplus $20,000 to be used for additional working capital for the business.

The buyer did not have to put any of their own money into the deal.

And the cash flow from the business was more than enough to pay the buyer for the new debt (for the loan against equipment and real estate) and also to pay themselves a salary to own and manage the business.

Dennis Lowery
Adducent, Inc.