|
|
|
|
 |
FAQ
|
1.) What type of business should
I purchase?
Answer: This is a tough one, but here
are a couple of guidelines.
a.)
b.)
c.)
d.) |
Pick a
business in a field that
interests you, not just a
profitable one. You are going to
be spending lots and lots of
time with this business.
Pick a business that fits your
personality and management
experience.
Example: You worked for a
company for 20 years that only
had a staff of 5 and 3 vendors
you may be overloaded if your
first business that you acquire
has a staff of 75 and 30
vendors. Also the opposite can
be true, if you are a real
people person and used to manage
a staff of 100+ you could be
bored silly with a product based
business with 5 employees.
Pick a business that you can
afford. One of the greatest
factors in business failure is
under capitalization. If you
have $30K cash $100K home equity
and $75K in you retirement plan,
don’t try to purchase a business
with the down payment of $200K,
you may run short of cash with
even the slightest hic-cup to
your business.
Pick a business that fits your
financial lifestyle. Simply put
if you need a salary of $80K to
support your family you may be
looking at the wrong business if
the total available cash to
owner is only $40K. |
2.) How do I obtain financing?
Answer: HSC works with various banks,
regional CDC offices. leasing companies
to assist buyers obtain the financing
necessary to obtain their business of
choice. HSC can assist you in finance
planning to save your valuable time and
money when seeking financing in addition
the commercial banking HSC has
experience in using IRA/401K rollover
financing /contract for deed financing.
1031 exchanges, lease to own and many
other avenues to obtain financing.
3.) How much down payment do I need to
buy a business?
Answer: The answer could vary greatly.
It depends on your credit score, your
experience in the business type you are
purchasing, how many assets the business
has and profitability of the business
you are purchasing. The answer is
usually 20-30% of purchase price.
4.) Why is the owner selling?
Answer: Most businesses are for sale for
a multitude of reasons. Owner
retirement, burnout, relocation, and
divorce are several reasons. Many times
the reason has nothing to do with the
financial strength of the business. Many
baby boomers are at retirement age
without heirs to carry on the business,
so the owner needs to sell the company
to fund retirement.
5.) How do I develop a good business
plan?
Answer: There are several good sources
to get information, the Small Business
Administration “SBA” has information,
another source is a certified
developmental company “CDC” that
originates loans for the SBA, there are
regional offices across the state. Go
to: www.SBA.gov or www.Score.org or
phone 1-800-634-0245 for more
information.
6.) What sort of licensing do I need?
Answer: Every business is somewhat
different. Local licensing varies by
City or County along with State
licensing. HSC will assist you in
obtaining the various applications
necessary to be fully licensed in your
new business.
7.) Should I use my residential realtor
to assist in buying a business?
Answer: Probably not. Business
brokerage/commercial sales are as
different as apples and oranges from
selling homes, condo’s, lakeshore, etc.
Although they may sincerely want to
assist you, you may waste valuable time,
energy and money if they are not fully
experienced in business sales. Find an
experienced brokerage that has
experience in the field that you want to
enter.
8.) Who pays the commission?
Answer: Commissions are usually paid at
closing by the Seller. However,
occasionally we have represented the
buyer with the commission being the
responsibility of the buyer.
9.) What is F,F, & E?
Answer: This stands for Furniture,
Fixtures and Equipment. This does not
include real estate or leasehold
improvements that are part of the lease.
Example: Restaurant listed for sale with
FF&E of $100K, this represents the value
of tables, chairs, kitchen equipment,
dishes, etc in good working condition
and in an operating business. If a
business is closed the value goes down
dramatically to liquidation value,
usually 5-15% of new costs.
10.) What is Cash Flow?
Answer: It’s not sales and it’s not net
profit but somewhere in between. Cash
flow is EBITDA = Earnings, Before
Interest, Taxes, Depreciation and
Amortization. Example: Restaurant has
sales of $500K, gross profit of $350K
and net profit of $20K at a glance this
business may not look that attractive,
but in fact may have a cash flow of
$100K. We help you determine the real
numbers.
11.) Should I purchase the land and
building or lease the premises?
Answer: As a rule to purchase the real
estate it will require more up-front
capital. Additionally there are added
responsibilities to being the landlord,
ie, snow removal, lawn care, additional
insurance, building maintenance, just to
name a few. Many operators of multiple
units prefer to lease and use saved
capital to open additional units. On the
purchase side, you are building equity
not just in your business, but in the
property as well. Banks like real estate
because the value is more stable than
with assets within a leased property.
This is an important facet of your
business plan and should be considered
carefully.
|
| |
| |
| |
| |
| |
|
|
| |
|
|
| |
| |
|
|
|
