Event: How to buy and sell your business ...

mhandelsman 11 posts since
Nov 13, 2008

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15. Re: Event November 13: How to buy and sell your business Nov 13, 2008 2:29 PM

in response to: garymack

Hi GaryMack, you asked quite a few questions in your post, so I'll try to get to them all quickly. First, I'm always very concerned when a business buyer is using their retirement funds to purchase a business. I assume you understand the risk you're taking, in that only about 10% of new businesses succeed, and I'd hate to see you lose your retirement funds due to a business failure. If you are set on doing this, be sure you check out companies that can help you use your 401K without a penalty for early withdrawl. For example, Guidant Financial is one of the larger and more reputable players in this space.

In terms of your question about a C-corp, I'll have to ask you to seek the advice of an accounting professional on the best corporate structure for you. There are some resources like The Company Corporation that can help you research the issues and incorporate at a lower fee, but you'll have to have the confidence in doing it yourself.

You are correct that SBA loans are very tough to secure these days. One alternative is to check out some new "peer-to-peer" lending sources, like Virgin Money or Prosper.com, where you can borrow from others through their website. It's a relatively new form of financing that's growing quickly. Good luck starting your new business during these tough times!

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mhandelsman 11 posts since
Nov 13, 2008

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16. Re: Event November 13: How to buy and sell your business Nov 13, 2008 2:34 PM

in response to: garymack

Hi again Garymack - In terms of a fair price for a business you're thinking of buying or selling, I'd suggest starting with a BizBuySell valuation report. Ours is the only one of its kind, in that it gives consumers direct access to valuation data and comps for recently sold businesses. It is inexpensive ($19.95 - $59.95, depending on the number of comps), but it's fairly rudimentary, and no substitute for a professional business valuation. Once you've found a specific business you want to buy, I'd suggest either using a business broker, or an accountant and lawyer to help you with the transaction. It's a complicated process, and one that I wouldn't enter into without professional help.

Regarding your question about buying a franchise, I'd suggest you look at my earlier post above to Tori, which I quickly reveiw the pros and cons of an existing business vs. a franchise vs. an at-home business.

Finally, regarding your question about working with a broker... I would recommend it. Most businesses that are listed for sale on our marketplace, bizbuysell.com, are represented by brokers. In most cases, brokers act as an intermediary in the transaction, helping the buyer and seller reach resolution on the deal. If you find a seller that isn't using a broker, you can choose to pay a broker to represent you in the purchase, or you could use an accountant and/or lawyer to assist you. Unless you have experience with business transactions, I'd suggest you use a broker or other professional. Thanks, and good luck!

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caffeinated 176 posts since
Apr 29, 2008

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17. Re: Event November 13: How to buy and sell your business Nov 13, 2008 2:38 PM

Hi Mike,

Is there a point of no return where I should consider to flat out dissolve my company? Or should I always be thinking sell sell sell?

caffeinated

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mhandelsman 11 posts since
Nov 13, 2008

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18. Re: Event November 13: How to buy and sell your business Nov 13, 2008 2:43 PM

in response to: caffeinated

Hi Caffeinated - I'm sorry to hear that you're struggling with your business. The fundamental question about your business is if it is sellable. What usually determines if it is sellable is if there is a cash flow from the business that will allow someone to make a living from it (or if it has the potential to have that cash flow). I'm guessing from your question that it might not have that cash flow. In that case, your choices are to continue to run the business to the point that it is successful enough to sell, or to dissolve the company and sell whatever assets you might have (inventory, fixtures, etc.).

If your business is sellable, and you've decided it's time to get out, then by all means prepare for the sale. This would involve pulling together your historical financial documents (2-4 years of tax returns and books), preparing the business physically for sale (painting a worn building, cleaning up a dirty warehouse, etc.), and making sure that your lease and employee situations are right for a sale (secure long-term lease, employees who will stay upon transfer of ownership).

I hope that helps!

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simon07 38 posts since
Nov 28, 2007

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19. Re: Event November 13: How to buy and sell your business Nov 13, 2008 2:44 PM

I heard that the business that I am working at may soon change hands. The owners are looking to retire. If I'm looking to purchase the company I currently work at, how do you suggest I approach management? Having intimate knowledge of the company, is there anything I can leverage to my advantage?

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mhandelsman 11 posts since
Nov 13, 2008

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20. Re: Event November 13: How to buy and sell your business Nov 13, 2008 2:49 PM

in response to: simon07

Hi Simon07 - This sounds like a good opportunity for you. Whenever you have an owner who wants to sell, and you have involvement and good knowledge of the business, that sounds like a rare opportunity. You are uniquely positioned, given your knowledge of the business, to make the most of buying this business.

I would suggest first getting your ducks in a row in terms of what purchasing the business might entail, in other words, see if you can understand what the business might sell for, and how much cash flow it generates. If you know this information, you might then determine if you have the resources to purchase the business, or might need another form of financing (more likely). Once you have some information on potential sources of funds, then you might approach the owner with your interest in buying the business. Hopefully your understanding of the potential price and access to funds will convince the owner to consider you a serious buyer.

Good luck!

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ferriss 2 posts since
Oct 28, 2008

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21. Re: Event November 13: How to buy and sell your business Nov 13, 2008 2:50 PM

If I narrowed down my choices to two competing franchises, what advice can you give me in my decision making process? What type of criteria should I be using?

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mhandelsman 11 posts since
Nov 13, 2008

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22. Re: Event November 13: How to buy and sell your business Nov 13, 2008 2:56 PM

in response to: ferriss

Hi Ferriss - I'm always glad to see an entrepreneur pursuing their dream, so congrats on starting your new business. It sounds like you've done a good job on the first step of deciding which franchise might be right for you by evaluating competing franchises on their start-up cost, royalty structure/fee, brand support, and other marketing and service support. Now that you're down to your final two, I would suggest that you dig as deeply as possible to understand which one will give you the best chance to succeed. You should certainly interview a minimum of 2-3 existing franchisees from each company (the one's that you contact on your own are probably better resources than ones the company might put you in touch with), and ask them a detailed set of questions about franchise support, help with opening, ongoing operational support, any fees that you might now know about, etc.

Then I would evaluate the franchises in terms of how they fit with your skills and experience. For example, if you have strong operating and management experience, but little marketing experience, maybe one franchise provides more marketing support which better enhance your ability to succeed. Good luck with your decision!

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SBOCTeam 328 posts since
Jul 27, 2007

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23. Re: Event November 13: How to buy and sell your business Nov 13, 2008 2:57 PM

Mike,

Its looks like we're approaching the end of our hour together. Are there any words of wisdom you'd like to leave for the Community? Any advice for aspiring entrepreneurs?

Thanks for your time!

The SBOC Team

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mhandelsman 11 posts since
Nov 13, 2008

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24. Re: Event November 13: How to buy and sell your business Nov 13, 2008 3:00 PM

in response to: SBOCTeam

Thanks SBOC Team, I appreciate the opportunity to participate today.

With over 50,000 businesses for sale on our bizbuysell.com and several hundred thousand buyers using our site each month, our goal at BizBuySell is to help business buyers and sellers transact successfully. For those who participated, please keep in mind that BizBuySell can help you find a business broker (our database is the largest in the U.S., with over 4,000 business brokers searchable by state and county), value a business, find a franchise, or buy or sell successfully. Good luck to all of those existing and aspiring business owners who participated.

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SBOCTeam 328 posts since
Jul 27, 2007

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25. Re: Event November 13: How to buy and sell your business Nov 13, 2008 3:07 PM

in response to: SBOCTeam

Community members, while our session with Mike has now concluded, please feel free to discuss today's session and the questions answered. Again, if you'd like more information about Mike and BizBuySell.com, visit:

http://www.bizbuysell.com

Thanks again,
The SBOC Team

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