Post: #1

Hi all,

I was wondering if anyone here has experienced buying an established business or has any options on it?

E.g. Bizbuysell.com has 1000s of business for sale across the country. Typically you will pay at least 2.5x upwards of the yearly profit.

I've been in contact with regards a few but the fear is always... is there a reason the owner is selling that you are not aware of, e.g. New compution, regulation, reduced demand.

Post: #2

The only way to know is to get complete access to the financial records.

Ask for everything. The owner should be willing to give it to you without hesitation. Any resistance and you should walk away.

Post: #3

Harvard Business Review Guide To Buying A Small Business

Entrepreneurship through acquisition of small, enduringly profitable businesses with slow growth of repeat customers. From motivated sellers.

Fascinating insights — google and buy.

(Too lazy to link on mobile - let’s leave it as an exercise for the motivated reader!)

Post: #4

To your fear, it is true that selling a profitable biz is a worse deal than hiring a manager and becoming a passive owner. So a buyer should be wary of a young(ish) owner prepared to walk away — what does he know that we don’t?

Retiring owners can be a great source: they are motivated to sell for reasons that likely are not shady.

Post: #5

(01-17-2018 01:09 AM)456 Wrote:  Retiring owners can be a great source: they are motivated to sell for reasons that likely are not shady.

Yes, correct. Business retention is in the dumps and is a big issue here in North America. Many retirees have profitable business but have nobody in the family who wants to carry it in and see forced to sell. The issue becomes then finding who will manage and operate it but if there is underlying opportunity to match the right people in place can be done.

Post: #6

Thanks for the comments all.

I’m now on chapter 3 of the HBR book.

Superb recommendation!

Post: #7

Its very hard to get a true picture of the internal state of a business. Books and accounts can be fudged and manipulated so easily.

Why sell? If it's such a good business, why is it up for sale?

It's much better to start your own business from scratch I think.

Post: #8

Businesses are not very liquid so sellers will often finance.

A good M&A lawyer will draft an agreement where you don't have to put much of your own money in, and you use the profits of the busienss to pay the seller back. The agreement will have various (representations) promises about the status of the business which if untrue should excuse some or all of your obligation to repay the seller (give rise to an indemnificaiton claim).

Post: #9

Extremely valuable info. Thank you!