[Free Book Preview #17] Acquisition of a For-Sale Business for the Investor Entrepreneur.

Hey there, Freedom Seeker!

Welcome to the exhilarating big sky of small business entrepreneurship!

I wrote a book for you. This book reveals the Unbiased Small Business Research Formula developed from decades in the trenches of American Main Street and online business as a small business entrepreneur and a coach. Its objective is to help you become the successful creator of the new life you envision by objectively guiding you in researching and choosing the right business.

In the next weeks, I’ll share free sections of the book with you before it’s released for publication and available for purchase.

Last week we discussed the pros and cons of starting a business from an idea. The next possibility is to buy a business. If diving into the unknown to create a business from the ground up gives you knots in your stomach, maybe buying an established business is a good option for you. You might acquire a business that has positive cash flow or purchase the assets of a struggling company that has potential.

Who this is for

Acquiring a business requires access to enough capital, especially if it is a business that is cash-flow positive. It can be an excellent ownership path if you prefer a proven company that can deliver the life that fits you. You have flexibility in owning a business that might not be exactly in alignment with your life purpose, although you might still be lucky and find one. 

Acquiring a for-sale business is also a good option if you only want to spend a few years running a business before you retire or undertake another project and when you don’t want to have to ramp up an unproven company to break even and profitable points. In this case, you might be perfectly happy investing in a cash-flowing business with the intention of at least recovering your investment in a few years. 

An acquisition can also be a good opportunity if you seek to turn around a failing company by acquiring its assets, making it profitable to build equity. 

The advantages:

Unlike starting a business from scratch or intending to develop a new franchise, you’ll have access to at least three years of financials, making it easier to project the future by looking into the business’ past. The assumed predictability of an established business is more attractive to banks, thus making funding more accessible than with an unproven business model. You might find a company where the seller finds it fiscally advantageous to finance part or most of your purchase of their business. 

As always, when working with one or several brokers, understand that they are incentivized by the sellers upon closing the sale of any type of business you might acquire. It is not their responsibility or expertise to ensure the business is the right fit for you and the life you envision. Only you can do that. This book aims to help you make the most objective decision in choosing a business where you’ll succeed.

Buying a cash flow-positive business: The company’s seller went through the stages of proving the business concept, building a customer base, building a brand, establishing systems, and hiring and training staff. Here you don’t need to worry about proving the idea. Even if you have plans to improve or re-brand the business, you have the advantage of a built-in audience to research and validate the new solutions you might seek to implement. 

 The challenges:

Limited equity growth: Keep in mind that a cash-flowing business often means the business is mostly or fully optimized. And the market value of a profitable business is, of course, higher. Meaning you will need to invest greater sums in a profitable business. The advantage is that you won’t need to budget as much working capital, if any, to prove the concept.* 

*BLUE Note that a key benefit of the  Right Business Right Life formula is to help you shrink the timeline from startup capital investment to profitability, thus reducing working capital needs in any business.

For example, if you buy a restaurant, spa, or frozen yogurt shop with an 80% occupancy/efficiency rate, it is pretty much optimized. The direct way to increase revenues, hence equity, will be to add more rooms (hotel), more tables (restaurant), more treatment rooms (spa), or more frozen yogurt machines or to diversify your offerings. This will require expansion with additional resources: real estate space, leasehold improvements, equipment, and staff, hence the need to inject more capital into the business beyond the purchase price. If your goal is to grow a business and cash in big on the equity someday when you sell it, you have several options:

  • Be OK with trading cash flow for equity, and decide to use that cash flow to expand the business over time to generate additional revenue streams.

  • Determine how you will expand the current business, how much additional capital investment will be required, and the source of financing. 

  • Consider ways to efficiently scale the business without additional or limited input, such as automation, adding an e-commerce store, digital transformation, optimization, outsourcing, and leveraging existing resources.

Buying the assets of a business: Plenty of non-profitable companies are for sale. It can be an excellent opportunity for the right buyer with the right set of skills and a clear vision. Suppose you have an idea to start a business in your market. Instead, you might acquire a company’s assets like the one you were considering creating and pay cents on the dollar for startup costs. In the next chapter, the external research, we will discuss how to generate ideas by contrasting them with all paths to business ownership, including what already exists and what can be better executed.

Acquiring an independent business means that you will inherit the flaws of the business. From day one of your acquisition, you are responsible for what might have occurred in the past of the business, even if you and nothing to do with it. Be sure to exercise due diligence and consider the legacy issues you might encounter related to, for example, staff challenges, customer dissatisfaction, obsolete equipment to replace, pending legal conflict, etc.

Joining the VIP Waitlist

Would you like early access to your copy of the book as soon as it is released and receive a bonus book companion coaching session?

During the private coaching session, I’ll guide you through the exercises and templates in the book. Available to the first 20 VIPs who purchase the book. To join the VIP waitlist, click here.

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Getting started

If this is you…
Do you want greater freedom & income
from a business you own?
If so, you probably have a question or two about
starting a business from an idea or buying one.
A critical step is to build a business foundation for
success BEFORE you invest greatly.
Click here to book a no-cost consultation.