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    10 Replies Latest reply on May 11, 2009 3:35 PM by phanio

    Questions about starting my own business

    Dohm03 Wayfarer
      I am the manager of a used cd/dvd/video game store. It does very well profit wise and I have been there for six years. I recently talked to the owner about purchasing the place (the building is rented but I would buy all the merchandise and computer equipment, etc) and he seemed very interested. It has always made money and I know with the ideas and improves I have thought up that it will continue to be very profitable. My only problem is getting some capital together. I have never paid a bill late in my life but I dont have quite a bit of debt due to student loans and a vehicle loan, etc. I am looking to get an $80,000 small business loan to purchase the business and make some improvements. Any advice would be greatly appreciated.

      Feel free to reply here or send me an email at MitchDohm@gmail.com

       

      Thank You
        • Re: Questions about starting my own business
          LUCKIEST Guide
          Starting my own business, Welcome Mitch

          Who are you?? Where are you?? Where do I mail the check??

          If I wanted to purchase a business, I would do two things. One: Develop a Business Plan

          Two: Contact SCORE. SCORE is FREE and can help.

          Good luck, LUCKIEST
          1 of 1 people found this helpful
            • Re: Questions about starting my own business
              Dohm03 Wayfarer
              I am in Madison, WI. The store is located on pretty much the busiest tourist street in the entire city. I have already developed a business plan. I also wanted to say sorry for the typo in my first post it was REALLY early in the morning and I was half asleep.
                • Re: Questions about starting my own business
                  Dohm03 Wayfarer
                  Also local news channels interviewed my boss recently because since the recession profits have gone way up in the used media market. He told me that he was up 20% in 2008 as opposed to 2007. There would be little overhead (there would probably be just 2 employess, me and one person I would hire) because I intended to work my butt off to make this successful. $40,000 would go to purchasing the business and equipment and inventory and the rest would be used to improve the building and aesthetic features of the interior.
              • Re: Questions about starting my own business
                phanio Pioneer
                There are many options for you. Please visit our website - just search for 'Business Money Today' - we provide information and resources bregarding business credit.

                Business Money Today
                  • Re: Questions about starting my own business
                    Dohm03 Wayfarer
                    Just talked to the owner again today. He said and I quote "We have worked together for a long time and I want you to succeed. So if you come up with $28,000 I will sell you the whole thing."

                    Amazing. So my new loan amount request is $50,000. That should be plenty enough to get everything that I need.
                      • Re: Questions about starting my own business
                        phanio Pioneer
                        Yes, that amount should be doable. Your best bet is to try for a small term loan - there are some sources listed in this tread as well as many others. Just remember, they all will be looking for two things - 1) your willingness to repay (your credit) and 2) your ability to repay (profitablity or income).

                        I would suggest you find a SCORE office or a Small Business Development Center (SBDC) - make an appointment. There services are free. But, they can help you determine if this business is right for you - meaning that it will cash flow enough to cover it's expenses as well as provide you the funds to repay the loan as well as some profit.

                        Business Money Today
                    • Re: Questions about starting my own business
                      Tracker

                      There are a lot of important things to cover when buying a business. So it is not practical to put them all here. But I will list here some of the high points that you should look at:

                      • What is the reason for the sale? I think its important to determine why he wants to sell. Is the owner selling because he "wants" to do something else or that he "needs" to because they see the business not doing as well in the future as it has in the past. The real reason for selling is very important to determine early on as best you can.
                      • With this type of business I'm sure that location is important. Is the traffic (I'm talking flow of people/customers/prospects etc.) volume in the area steady, going up, declining? Is the area growing, flat or declining? Does the city have any planned construction over the next 3 to 5 years that will disrupt access to the business? I have seen location sensitive businesses go out of business because of highway construction disrupting the traffic (of cars and people) in the business area.
                      • What is the revenue and net income of the business for the past 3 to 5 years? Check their financials for at least the last 3 years and see how sales and profits are trending. Are they going up, flat or declining?
                      • What do they forecast for the next 3 to 5 years? And are the projections realistic.
                      • How strong is the balance sheet ... i.e. are there assets with value and is the business carrying debt? If there is any debt, can it be assumed?
                      • Do they have appraisals to prove any value they are putting on any of the assets?
                      • Business values (i.e. their asking price or the selling price) are largely determined by the net income or EBITDA of the business (sometimes with owners benefits and compensation added back in) at a fair-market multiple on those earnings often plus the value of tangible assets. Do you know what they are basing their asking price on? Is that a realistic, fair and acceptable price? Again, keep in mind what the picture for the business looks like in the future. New business buyers often make the mistake of paying for past performance but end up with a business headed down, not worth as much in the future. Check things out closely.
                      • Will the owner carry back any financing? If he needs to sell the business quick, see if he will carry a good part of the purchase price on a note paid from the business earnings ... if you have a close relationship with the owner they may be willing to do this. That may lower the amount of cash you need for the deal quite a bit.

                       

                      With any business acquisition it important to establish the stability of the revenue (over the past 3 to 5 years and going forward for the next 3 to 5 years). Another thing to look at would be operating expenses. Are there any opportunities to reduce expenses and what is the outlook if you will face higher operating expenses than the current owners? And the question about the growth of the area, traffic flow, location and any planned highway construction is important to look at as well.

                       


                      There are many more questions but the above will be critical when it comes to initially checking out the business as part of your due diligence. And these are they types of things you would need to get together to present to prospective funding sources to help you buy the business. Since you may not have a lot of credit and collateral built up that a conventional lender is going to want to see, you should try alternative sources for amounts that could add up to enough to swing the deal. If you get the cash required to pay the owner as a down-payment low enough, you might be able to find a financial partner or private lender or investor at one of these sites:

                       


                      http://www.accionusa.org/

                       


                      http://www.lendingclub.com/

                       

                      __
                      http://www.prosper.com/

                       


                      Buying a business means a lot of work and it can be frustrating to try and get all the pieces and funding lined up; but if the dream of owning your own business is important to you ... you can work at it to make it happen.

                      I hope the above helps you or gives you some direction.

                      Dennis Lowery
                      Adducent, Inc.
                      • Re: Questions about starting my own business
                        ggoodard Adventurer
                        I may be able to help. Please email your questions to me ggoodard@aol.com
                        • Re: Questions about starting my own business
                          DeanMalibu Adventurer
                          This happens to run right along with what I am trying to do...The video game industry is very very solid. If you need any help once you get started let me know I have some very extreme ideas that will make you even more profitable...hosting tournaments with other storess across the country is one...each owner throws something in the kiddy and gamers each pay an entry fee to the respective owners. They win and you win. Hope this little morsel of knowledge helps!
                          • Re: Questions about starting my own business
                            DeanMalibu Adventurer
                            If you drop me an email...I can show you how to improve your bottom line by at least 40%. What are your monthly averages for sales?? How much did the biz make last year??? Tell me the sq ft of biz...I have some things that will help you compete with the big boys easily.
                            my email is on my profile.