The information below is written primarily for entrepreneurs who are ready to purchase a business. If you are a corporate executive who would like to acquire one or more businesses as add-ons to your current company, click here for our Mergers, Acquisitions, Divestitures – Service, Practice Area.
Anyone can give you advice on buying a business, but only an expert in the field can give you the best advice. That’s why more and more people are looking beyond the opinions of friends, accountants, and lawyers, and are turning instead to The CDI Group, one of the most seasoned group of professionals in the Mid-Atlantic.
CREATING SUCCESS WITH HELP FROM THE CDI GROUP
Everyone has different reasons for choosing business ownership. Some want a change in lifestyle with more personal freedom and unlimited profit potential. Some plan to turn businesses into a family operation. Others choose to introduce new products and services through existing operations. And almost everyone is attracted by the estate building and tax advantages of owning a business.
Whatever your motivation, you can count on us to introduce you to businesses that match your individual interests, goals and capabilities. Your CDI professional is linked electronically to a worldwide system featuring thousands of qualified, available businesses in varying sizes and industry types. Choose from inventory offerings in your hometown, or in places you’ve always wanted to call home. Or, if you prefer your CDI professional can uncover business opportunities meeting your specific criteria, many of which are not currently listed and many that are not currently for sale.
THE NUMBERS TELL A STORY
The vast majority of all business buyers are first-time buyers, unprepared to meet the complexities of acquisition transactions.
More than 50% of all small to medium size business sales arranged without professional intermediaries result in buyer dissatisfaction.
Whether you’re prepared to invest $50,000 or $50 million, your first question about any business opportunity should be, “Why is this business for sale?”
Your CDI professional has the answer. Often times, an owner’s motivation is obvious – they may be ready to retire or is having health problems. There may be difficulties in a partnership, or a divorce. But, what if the reasons aren’t so apparent? How can you protect yourself from morning-after ‘surprises’? This is where CDI’s professional edge can really make a difference in a successful acquisition. We will make every effort to provide you with pertinent information on a target company’s financial performance, staffing, facilities, equipment, inventory, product lines, customers, and market areas served. Where we can’t provide verification of information given to us, we will let you know.
We will help you arrive at a realistic analysis of an operation’s strengths. We will be honest about its weaknesses. And we will urge you to be clear about your objectives and capabilities. Your CDI professional is interested in making matches between buyers and businesses, with your best interest at the center of what we do.
BUYING A BUSINESS IS ONE OF THE MOST IMPORTANT DECISIONS YOU WILL EVER MAKE
If you are like most people, you will buy a business only once in your lifetime. One shot at turning your visions into reality. One shot at getting it all right, or getting it all wrong.
If you are ready to invest your resources in a business of your own,talk it over with your family and a CDI professional. We are ready to help you own a business you can really enjoy and grow with.
We are ready to help you attain your dream.
SMOOTH TRANSACTIONS HELP LEAD TO SUCCESSFUL NEW OWNERSHIP OF YOUR BUSINESS
Whether you’re a first time business buyer or a seasoned investor, you can look to CDI for assistance in every phase of the transaction.
CDI professionals are accomplished trained business people, with successful backgrounds in careers ranging from management and accounting, to real estate, law, marketing and sales. Many of our people have owned, purchased, sold one or more of their own businesses. We have been where you are or want to be. Experience counts. We take pride in receiving continuous, advanced education in the art and regulation of business valuation, deal structuring, negotiation, deal closing and follow-up. Each CDI professional consults with “Strategic Partner” accountants and lawyers to provide practical expertise in legal, financial and tax issues, and each of our people is committed to the highest standards of professional ethics.
In short, CDI professionals have the skill, experience and dedication to help create success for and with you. We have $ millions worth of transaction experience to put to work for you.
THINGS A BUYER SHOULD KNOW
We are advocates of finding a business that you like and feel comfortable managing. You, like every other prospective buyer, have a vision of being your own boss and calling your own shots. An old saying in the real estate industry is … “The three most important things a buyer should look for are location, location & location.” While location is important to a business buyer, be aware that track record and management round out the three components of a successful business. Let us assume that you find a business that you like and its location is fine. But because of poor management, the business may not show the greatest record of accomplishment. Purchased for the right price and terms, this business could become more successful with proper management making it a good way to achieve your vision of being in business for yourself. Finally, be aware that many businesses are not priced correctly. By working with us, gathering enough financial information to construct a CDI Level 1 Estimate of Value™, if desired a USPAP Compliant Valuation, looking at payables, receivables, understanding Seller motivation, doing a CDI Banker Test and Justification of Price™ (to be sure you can finance a portion of the cost of acquisition) and many other factors, we can help you package and negotiate the right Price, Terms, and Conditions.
Interested in searching for a businesses for sale? Click here to start your search today!
THE PROCESS OF BUYING A BUSINESS IS AS FOLLOWS:
You can start in one of two places:
1. If you have already found a few businesses that sounds interesting to you, contact us. We can start the initial Due Diligence on your behalf, find out if the business for real or a bunch of fluff words and work with you starting with the Due Diligence all the way through the Closing.
2. Alternatively, if you do not know exactly what you are looking for and/or you have been looking for sometime, contact us. We have a process to help you find the business you want and work with you starting with the Due Diligence all the way through the Closing.
What follow are a few of the steps we would do with you. After reading this, if you are interested, contact us. We have a proprietary CDI Buy Side Process© that we can share with you.
- Meet with the Seller, asking from general to probing questions on anything and everything, except actual price negotiations.
- Do your preliminary evaluation, based on the information provided by the seller to the broker and you.
- Make an offer, assuming that all of the information you have been provided is correct, but include contingencies, which allow you to confirm such information. We will show you how to write an offer to protect you as the buyer.
- Once a sales price is agreed upon, make a closer investigation of the business, confirming to your satisfaction the validity of your offer.
- Have documents prepared for the closing. You may agree with the seller to share the cost of a closing attorney. This lawyer will not argue the position for either party, but drafts all necessary legal documents to comply with the agreement a buyer and seller have reached.
- Close the purchase, and begin your first day as the owner of your own business. The seller will assist in an orderly transition because most of his money is coming from your success.
- You are part of the American Dream – You and your family own your own business!
WHAT WE CAN DO FOR YOU
A big advantage in buying an ongoing business is that you as the new owner have an immediate cash flow and an established customer base. You do not have to build a business; you simply take over an existing successful business with the present owner’s assistance.
We assist you in obtaining financing. Banks are reluctant to finance business purchases for several reasons. One, all small businesses attempt to minimize profits shown on financial statements to reduce tax liability. Also, a bank cannot come in to manage a business if foreclosure becomes necessary. Therefore, over ninety percent of business purchases are financed by the owner himself, which demonstrates his confidence in the business.
Unlike the sale of real estate or franchises, the sale of an ongoing business is very confidential for both the seller and the prospective buyer. All inquiries are held in strict confidence. Meetings are confidential, and we are available after hours and on weekends.
10 TIPS FOR BUYING THE RIGHT BUSINESS RIGHT
- Buy a business you like. Although profitability is important, you will risk making a terrible mistake if you do not buy a business that you like. Often, people who buy hastily without considering personal satisfaction later sell their businesses at a loss. Will you be proud to own the business? If you are not sure, do not buy that type of business.
- Be flexible. We advise clients to be open to all sorts of businesses. Do not lock your self into a McDonald’s or a Mailboxes, etc. Who knows, you may surprise yourself by taking a liking to a Blimpie or Signs Now franchise. If you lock into only one type of business, it will take you much longer to find a business to buy. Examine the following categories: retail; service; manufacturing; distribution; restaurant; lounge; coin-operated business. First, decide if there are any categories that you do not want to be in, then focus on the remaining categories.
- Do not expect much financial info. Do not expect “traditional” financial information from the owner of a privately owned business. The only accounting required of a privately owned business is filing tax returns, which are prepared to report the lowest possible tax liability. There are other ways to verify cash flow later.
- Consider chemistry. This may seem like an unusual recommendation, but we tell clients to forget about buying a business if they do not like the current owner. The buying process is a long and somewhat complicated one — it is imperative that the buyer and seller work through it together.
- Go with owner financing. The owner of the business should finance the purchase. In most cases, this is the sole source of financing available to buyers of an existing business. With owner financing, you can feel secure in believing the owner’s representations as to income and expenses, and you have a remedy if there are any problems after closing. It also gives you a “silent partner” with a personal stake in you success.
- Do not pay cash. You may not want a loan over your head, but do not pay all cash for a business – even if you have it. You should keep a stash on hand for emergencies and business improvements. If you insist on paying all cash, at least place some of the purchase price in escrow for a period of time to protect yourself from any problems that may surface after the closing.
- Make an offer before you have seen all of the financial and other business records of the business. It is simply not possible to know everything about a business before you make the initial offer. The offer does not commit you to the business, but it does let the seller know you are serious.
- Stay calm. Buying a business can be like dating. You’ve got so many emotions going – do you like the business, does the owner like you, is this feasible, what does my family think, etc. – that you’re bound to get a little flustered. Keep your wits about you; you will need them. Remain calm, and negotiate your offer with quite reflection and reasoned discussions. As you go through negotiations, always use this simple formula: Cash Flow Available minus Annual Payments to Owner = $$$ for you and your family. If at any time during the negotiations this formula does not result in enough money for you and your family, stop.
- Investigate the business. Once the owner has accepted your offer, the real work begins. Verify cash flow and identify any hidden problems. If you see red flags in either of these areas, change or terminate your offer. There should be stipulations in your offer that allow for this.
- Close quickly. Once the deal is made, try to close as quickly as possible. You do not want owner to have second thoughts or news of the sale to leak out to employees, suppliers and clients.
THE 90% RULE: FACTS ABOUT BUYERS
- 90% of all buyers are first-time buyers. In other words, they have never been in business before.
- 90% of all buyers will finance the purchase of their business.
- 90% of all buyers do not know what kind of business they want or best serves their needs.
- 90% of all buyers are terrified and/or uneducated in the business buying process.
- 90% (or more) will not buy the business that was advertised or the one that they called in on.
ADVANTAGES OF BUYING AN EXISTING BUSINESS
- Actual results rather than pro-forma.
- Immediate cash flow.
- Trained employees in place.
- Established suppliers and credit.
- Established customers and referral business.
- Existing licenses and permits.
- Training by the seller.
ADVANTAGES OF BUYING A FRANCHISE
- Known name means instant recognition.
- Proven product or service.
- Ongoing support means you are in business for yourself but not by yourself.
- In many cases, very good Operating Systems are in place. This can help you avoid many of the mistakes that have already been made by others and fixed.
- Opportunity to add additional units within the franchise system.
- Training by the seller.
- Not all Franchises are the same. Some are great, others good, others not so good. At CDI, we have people who have been with, and trained by, some of the best franchises in the world. We can help you understand the world of franchising and advise you if a given franchise may be good for you.
Professional resources, resourceful people, and a fundamental commitment to creating success for you, that is the CDI professional edge, and we are ready to put it to work for you. Feel free to contact us for a free, no-obligation, confidential discussion about your needs and wants, or complete a copy of our Buyer Description by clicking here.