Powell & Associates Inc

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Search Featured listings Why buy an existing business? Its a good question with a lot of good answers. Most Buyers want the cash flow. An existing business has customers, products and services, suppliers, employees and the necessary infrastructure to generate cash flow. Sometimes, its the opportunity to better utilize your professional skills and create a lifestyle that corporate bureaucracy simply won't permit. Some Buyers are expanding their existing business by buying a similar or regional company. Maybe its the opportunity live and work in a community that offers a better life for your family. A few points to consider when buying a business: Start with the obvious...Be Prepared! What type of entity will you establish to execute the purchase (i.e. Corporation, Limited Liability Company, Partnership, etc.)? What type of entity structure should you establish if unique financing solutions are needed such as the use of 401(k) funds created from a previous employment? Knowing the answer to these and other questions (in advance) can make the acquisition process a lot easier. Many buyers utilize a Structuring Specialist or "Transaction CPA" to assist with these complex issues. In addition to good planning it tells sellers you are serious about buying a business. An Overview: Get as much general information as you can. Determine if the products and services are of interest to you, the general location is somewhere you desire and the cash flow after debt service is at a level you are comfortable with. Look at the down payment requirement or financing options. If the down payment is not close to an amount your willing to invest its probably best to look at a different business and save everyone a lot of time. Detailed Information: If the general information presented peaks your interest, ask for more detailed data. You will most likely be asked to sign a confidentiality agreement and provide evidence of financial sufficiency (a financial statement) and other data to show you are qualified. Remember, Business Owners are very cautious about whom they give confidential information to so be prepared to demonstrate you are a serious buyer. Look at the historical revenue stream and cash flow. Is the business growing? If not, ask why. Is the owner suffering from burnout and just coasting? Was there an extraordinary event that affected revenue? Determine how much of the transaction the seller is willing to carry. A seller who offers some form of financing has confidence in the business and an incentive to help it succeed. If there is no seller financing, ask why? Lets take a look: During your visit to the business, take time to know the owner. Dont worry about negotiating a price. That could create tension and your Broker or Intermediary will handle this anyway. Determine if the seller takes pride in the operations and service given to customers. Find out if there is any technical expertise or licensing you would need to successfully run the business. If possible, find out if there is a way to increase or expand the business and what would be involved.

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