Tag: Business

How to Buy a Business

Ellen Chang 

FEB 12, 2019

So you want to be a business owner, but the prospect of starting your own business is intimidating. One potential solution: Buying an existing business. An existing business typically has customers, vendors and branding already in place. A good company will also have an adequate amount of inventory. That means you can take the key and continue the business without having to build supplier relationships from scratch.

This isn’t an easy route to entrepreneurship, though. Buying a business can be a complicated and arduous process, so you need to know what you’re getting yourself into. Here’s what you need to know.

Buying a Startup

If you’re an existing business owner who wants to expand your services or products, consider buying a startup. You can purchase a startup for its client list, brand, technology or intellectual property.

There are a lot of good reasons why buying a startup might be a good idea for a current business owner:

  • Buying a startup can help you attract and retain a different demographic without starting from scratch. 
  • The startup might have a distribution method that is a good fit for your own business.
  • While the profit margin of a startup tends to be lower than an established business, it might also have less debt. 
  • A small startup might be more nimble and able to adapt to change.

If you decide to go this route, take a close look at current staff. Look for businesses who have founders or staff with the type of talent that you are seeking. While you can always poach talent, buying a business could allow you to acquire a team that already works well together and is invested in the mission of their business.

Keep in mind that if you need to finance, startups present their own set of challenges.  Obtaining a loan for a startup business can be harder, since it would not have as long a track record as a business that has been operating for a decade. The startup might not even be profitable yet, and you might need to demonstrate a path to profitability or show how it will contribute to your own company’s bottom line.

Purchasing an Existing Business

If an existing company better fits your needs, look for one that has a good reputation, a steady list of customers and low operating expenses. Understand, though, that buying an existing business means doing a lot of due diligence. Here are some things to look out for:

  • The founder or owner will likely downplay any issues with a landlord or customers. Ask plenty of questions and ask for documentation.
  • Examine several years of its financial information and focus on how much profit it generated. Also look at its cash flow, debt levels and other expenses such as rent, marketing and advertising.
  • Determine if the owner plans to stay on or has any children who expect to take over a portion of the business. Hammer out all the details beforehand.
  • Acquiring an existing business might be more costly, especially if prior investors are involved. Consider whether you are willing to seek additional investors and take on a bank loan.

Above all, make sure you go into things with an understanding of what’s made the business successful. Buying an existing retail shop or restaurant might be easier than starting one from scratch, but remember that if you change the direction or tone of the business, the existing customers may not accept the changes readily. Further, radical changes to the business and its operations could alienate existing employees. Put your own imprint on the business and find ways to improve, but tread carefully.

Buying a Franchise

A franchise is in many ways the ultimate ready-made business. The brand is already established, and your involvement in marketing may be minimal. Certain aspects of its operations may be set in stone. If you take over a restaurant franchise, for instance, everything from the supply chain to the menu will likely be fixed.

Conducting due diligence on these businesses can often be easier, too. They have a longer history, more financials and other investors. If it’s a public company, it will be even easier to find key information on the business and its financials.

There are some decisions to make, however. You must decide if you want to buy a franchise in a new or existing location. Finding the right location will take time, and requires some research to ensure adequate foot traffic. And don’t assume that the branding and marketing will take care of themselves. While large franchises have a recognized brand, some of them are only well-known in certain states or regions of the country. Consider carefully whether this is a business and a brand with staying potential in your area.

One major issue with a franchise is the loss of control. You must adhere to its rules, procedures and other standardize practices. That might be a relief to some would-be owners, but others might chafe at it. Determine if you’re an entrepreneur at heart or merely want to purchase a business which generates a healthy profit.

Disadvantages

Even if a startup or existing business is highly profitable or popular, there are some disadvantages. In most cases, you will have to retain its current employees at least for the short-term. Turning over an entire staff is not a good choice fiscally or operationally. Don’t underestimate the value of institutional knowledge, to say nothing of the impact on morale of mass layoffs.

On the other hand, existing staff might be resistant to any changes you want to make. The employees may also not like new ones that you hire. And any changes that you make toward the pay structure, benefits and other human resources issues could face resistance. Assure your employees that you are going to stay in business and will not make drastic changes. The same is true for its board of directors and its investors.

Problems could also arise with your customers, clients and vendors. They likely have certain expectations of the business: The products it sells, its methods for doing business, and the length of billing cycles.

Decide before you purchase the business whether you want the CEO or founders to stay on to provide a smooth transition or if you want them to resign soon after the deal closes. There is no right or wrong answer to this issue. It depends on your goals for buying the business, as well as your personal preferences.

Before you sign a contract, consult and hire a business broker who can help guide you in the process. This process can take several months or longer and you will likely need the assistance of an auditor and lawyer. You will likely also need to employ the services of an accounting firm specializing in mergers and acquisitions. 

More Tips for Business Owners

People who own businesses also need to conduct their personal finances differently. Your taxes become more complicated, for one. Your budget and overall financial plan will also become more complicated than if you had an ordinary full-time job. That’s why many business owners choose to work with a financial advisor who specializes in these issues. We recommend using this financial advisor matching tool. Just answer some questions about your finances and goals, and the tool will match you with up to three advisors in your area.

Photo Credit: ©iStock.com/shapecharge, ©iStock.com/skynesher, ©iStock.com/valentinrussanov

ELLEN CHANG

Company mergers and acquisitions boomed at record pace in 2021: study — NYC Daily Post

Middle-market companies and private equity firms foresee an extremely strong year for the M&A market in 2022, with bullish forecasts for both deal volumes and for company valuations, according to a Citizens survey of 400 leaders at U.S. middle-market companies and private equity firms.

[ad_1] Companies bought and sold each other at a record pace in 2021, with 1,047 deals — each valued at more than $100 million — inked globally last year, according to a new study. And researchers say they don’t expect the mergers-and-acquisitions activity to slow down anytime soon. Last year’s M&A boom is the largest […]

Company mergers and acquisitions boomed at record pace in 2021: study — NYC Daily Post

10 Simple Things You Can Do For Your Team Today to Make Their Day Better

Helping your team feel good each day is a role every leader should play. It doesn’t have to be a big thing or complicated. Sometimes the easiest actions can be the most important in helping to create engagement and make each day a little better for everyone. Here are some simple ideas for you to try.

10 Simple Things You Can Do For Your Team Today to Make Their Day Better

https://effectiveretailleader.com/10-things-make-their-day-better/
— Read on effectiveretailleader.com/10-things-make-their-day-better/

Coaching, Training or Mentoring

Good overview centered on people development. Effective leaders demonstrate and use these skills to drive employee performance and engagement.

nathanwood.consulting/2017/12/04/the-differences-between-training-coaching-and-mentoring/

https://nathanwoodconsulting.files.wordpress.com/2017/12/development-styles.png

Introducing… Your Community Bank Wealth Advisor!

Financial planning is a very important and very sensitive matter for consumers to tackle. When individuals think about and reflect on their future with respect to financial growth and stability, they are caused to deal with so many “what if” scenarios. What should I do if rates sharply rise? How about if they fall? How can I feel secure about my investment portfolio in an uncertain economy? How does the local economy factor into my decision making – should it? What investment strategy is appropriate given my current life stage and goals? How should I be looking at protecting my assets and ensuring an income stream consistent with my lifestyle choices? WOW – so many important questions to ask that must be answered.

Forward thinking community banks like DNB First (DNBF) are expanding the services they provide to include wealth management, trust services, investment planning and insurance. These services are delivered to bank customers through licensed and professional, experienced advisors who have a deep and core understanding of their client’s needs. These days, wealth services provided by some community banks are delivered with similar platforms that clients may experience when dealing with a major, national banking or financial services giant. The capacity for community banks to offer these services has improved dramatically. This has created an environment where customers of smaller banks can experience services consistent with some of the major players.

The big difference of course, comes down to the relationship that community banks enjoy with their customers. Large banking giants drive “referral” programs where customer information is shared from one part of the operating entity to the other. This creates an environment where the main relationship manager becomes secondary to the wealth or investment professional. Effective community bank models “introduce” or INCLUDE the professionals into an already effective rapport with the bank relationship manager. Like the song says, “You want to go where everybody knows your name.”

The subtle word difference between referral and introduction is actually an important distinction to make. When working with your bank or financial institution, find out if you are being “referred” away to someone else, or if a licensed investment professional is being “introduced” or included in an already effective banking relationship. It makes a huge difference in how you experience your bank!

Vincent Liuzzi

Executive Leader

Gratitude – the highest ROI management tool?

Recently, I read an article written by the CEO of Linkedin about a management tool that provides the highest return on investment, and is a proven driver of workplace productivity.

What was that tool you say? “GRATITUDE”. Yes, gratitude… How simple – authentic and genuine gratitude was named as the most effective management tool providing the most significant return.

I’ve always believed that happy, and engaged team members are more productive, provide better service and generate more revenue for the organization. It seems so natural that gratitude should be named as a motivator and driver of outstanding leadership in breakthrough performance.

So in this season of thanks and appreciation, it is very appropriate to leverage this great tool and give thanks for our many blessings at home, out in the community, and also to those we spend so much time with at work. When you see it, say it! Share your thanks and appreciation. The next time someone compliments you on a job well done, try grounding yourself from the feet up, look the person straight in the eye, and let them know how much it means to you.

That’s an outstanding return on an important investment.

– Vince Liuzzi, Executive Leader, Philadelphia PA