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Re: Business Purchase (Long) Posted by Wil W [Email]  (#1148) [Profile/Gallery]
(more from Wil W) on Mon, 23 Oct 2006 08:50:46
In Reply to: Re: Business Purchase, Justin VanAbrahams  [Profile/Gallery]
, Sat, 21 Oct 2006 23:52:24
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NickR,
Justin's points are good. I am a Independent Venture Consultant and I help inventors/entrepreneurs with various aspects of their business/idea: due dilligence, strategy, bus dev, corp dev, raising $$, getting financing, divestiture, etc. But, I primarily focus on high growth opportunities that can be exited in 3-5 yrs with 5+ multiples.
That said, you have to know the possibilities for the business you are looking at. Since you have an MBA (mine is in Finance and Entreprenuership), you probably already know this. You might be able to get a loan depending on the business assets (CF, equipment, inventory, etc.) try a regional/local bank, they might be more flexible with valuations. Also you might work a deal with seller especially if it's a lifestyle business. See if they'd be willing to finance more that 25%, defer payment into the future for more $$, or popssibly get a cut of profits until somepoint where you have paid them off. Depending on the business, you might even get your customer(s)/supplier(s) to finance/invest in your purchase. Be creative and strategic.
Although I do not know the business/industry, you really should put together a business plan for multiple reasons. You'll get a better audience at the bank, same for an investor. Also, you want to know what your getting in. You need to know what strategic levers are in the business/industry. You really want to know the standard business plan info: what's the product, why are you unique, how and why you'll win, who are the buyers, why do they like/want your produt, what's the margins, who are competitors (direct/indirect), what are the threats (gov, license, culture, fad,...), what is the exit plan if any, etc.
Also, I assume you are trying to improve/grow the business so the previous owners BP(if it exists) may not be really useful for you. If they've been in it for a while then they often don't really have one. If they are selling after a short period of ownership and have a BP, then that's a Red Flag, why are they selling, what was wrong with their BP. Anyway, you want to think through and document your thoughts and assumptions for the business. It's a good excercise to validate your assumptions.
There is obviously much more involved as you know, but just some thoughts for you. Don't let this discourage you since starting/buying a business is really stressful but can be very rewarding. Every good entreprenuer I know has millions of ideas for a business, but they are passionate about their business/industry.
Just make sure you have your eyes wide open. If possible get some trusted knowledgeable business friends to challenge you on your decision. If you can successfully defend your decision your that much better off.
Good Luck!
Wil W
'89 SPG
'02 Aero Wagon
posted by 71.210.129...
, Sun, 22 Oct 2006 02:12:36, Sat, 21 Oct 2006 23:52:24, Mon, 23 Oct 2006 08:50:46 <-- Viewing This Message, Tue, 24 Oct 2006 12:38:09
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