August 27th, 2009 by Bruce

If you have an entrepreneurial itch or have always wanted to buy a business, is now the right time for you to act? In the present difficult economic situation, your first thought would likely be something negative, but keep in mind that wherever there is adversity, there is an opportunity for making a profit, and that all sorts of individuals have become extremely successful in periods of crippling economic news. While you’ll always have to be accepting to working double-time and making personal sacrifices regularly when you own a business yourself, you’ll also have to possess extensive additional resources and an even more level-headed temperament should you pursue purchasing a business in an economic downturn.

One of the biggest difficulties you’ll have to surmount deals with financing. Don’t ever underestimate the actual volume of money that’s required to get a business up and running. Don’t just look at the numbers which you come up with when you value a business, but estimate how much it would cost you to operate the business for three years. Once you have a figure, quadruple it!

To achieve financing from a bank or other institution these days may prove to be an impossible task. The days of easy money are well in the past. You will need a very strong personal credit rating at the very least, but also probably have to put up a lot of cash and collateral. Banks and lending institutions are very wary these days, and it is not unheard of for them to cancel established lines of credit, even if the enterprise has a solid track record and credit rating. Make sure that you are not relying on the unknown too much.

Right now is the ideal time to negotiate seller financing so take advantage of the fact that banks aren’t lending and keep the seller on the hook for your success by having them carry a balance of sale.

Make sure that you identify a need for the product or services that you will be selling. It is not enough just to own a business, what you’re offering people has to be in demand. While most individuals seem to believe that business will decline during an economic downturn, that isn’t necessarily true. There are specific kinds of businesses that will expand during a recession, and there are also areas of business that can be deemed as necessary. Maybe you should buy a business which is “bulletproof” through a recession?

Don’t be afraid to think outside of the box when it comes to buying a business. You may find the solution that will fit your needs perfectly. While several people may believe that the kind of business you’re pursuing is irresponsible, you may think that it represents a golden opportunity. For example, whilst lawn care service might appear to be a luxury, many people are finding that they have additional pressures on their time and can least afford to spend hours in the yard themselves.

There’s one particular thing to bear in mind in times of recession however – do not let emotions come into the decision making process. Use your head and make sure that when you are ready to look at a business for sale, you have the right fundamentals in place, can finance or have definite access to finance to ensure that the business can exist for at least three years. Be as diligent as possible when it comes to assessing the absolute need for your product or service, in bad times as well as good.

Richard Parker is the President and founder of the Diomo Corporation – The Business Buyer Resource Center. His inspiring materials, seminars and consulting have assisted thousands of business buyers with achieving their life long dream of buying a business.

Business, Buying A Business, Decision making, Entrepreneur, Marketing Small Business Rules, Small Business, Small Business Startup, Startup Business Marketing

August 3rd, 2009 by Bruce

Despite an economic downturn, poor sales, sky-rocketing unemployment and a banking emergency, this actually may be a great time to think about purchasing a business. The reason is quite simple: it’s a buyer’s market, which means the environment is ideal to own a business.

Buy business trends are moving upwards, with sellers relaxing their buy business terms because there are a lesser number of qualified buyers, third-party financing has become almost impossible, and chances to negotiate an excellent deal for a business for sale aplenty.

However, the receptive environment for purchasing a business doesn’t mean you should march ahead without establishing specific buy business fundamentals. It’s quite common for highly motivated, yet inexperienced buyers, to pay out far too much for a business which has no real chance of staying afloat, even in better than average times.

First and foremost, it’s important to know the purchase business climate before even considering whether to own a business. At the moment, the buying a business market is being significantly damaged by the present economy and there is very little small business lending happening. Consumer confidence that the economy will turn around anytime soon is very low and many businesses are seeing multi-month declines. For these reasons, it’s crucial when pursuing a business for sale to negotiate a good deal that will assure your protection both now and in the future if the economy doesn’t improve relatively soon.

Before deciding whether to own a business during these tumultuous times, there are six basic buy business steps to follow. By following smart purchase business philosophies, you will position your new business to succeed regardless of the economic climate.

Here is a look at the six important steps to buying a business:

1. Request Several Previous 12-Month Profit & Loss Statements. Normally, a seller would provide year-end financial statements, any interim statements and tax returns for buy business inquiries. But considering the current economic conditions, you need to see the business for sale financials from the current date and back to the past 12 months, as well as financials from the prior 12 months and the 12-month period before that. This will give you a good idea of the overall profitability of the business for sale.

2. Be On The Lookout For Hidden Expense Cuts. With a business for sale, many sellers try to make the company look better by making cuts to enhance profits. When reviewing the financials, look at expenses for marketing, advertising and payroll by doing an item-by-item comparison over several periods and comparing the number to sales or income. Furthermore, a review of the balance sheet will show whether inventory has been cut or if shareholders or owners contributed their own money to improve the company’s bottom line.

3. Review The Customer Base. When buying a business, knowing the existing customer base is paramount. Although a business may be performing well, sales might show problems. If you chose to own a business where sales are dwindling, be sure to adjust the purchase price accordingly and have a new sales and marketing strategy in place.

4. Negotiate Earnouts. These are purchase business terms based on performance. Linked to the purchase price, earnouts are assurances that the business for sale can survive in the current economic climate and grow in the near future. Once you’ve completed a comprehensive analysis of the books, set an asking price that reflects the present performance of the business and its potential stability for possible future declines. It is critical to negotiate a performance-based deal, especially if the purchase business evaluation indicates a loss or no recent stability or growth. With an earnout structure, the seller receives the balance of the purchase price when certain targets are met in the future. Earnouts can be based on profitability, sales, or retention of customers.

5. Insist on Seller Financing. As far as lenders are concerned, this is not a buy business climate. So the likelihood of you acquiring financing for purchasing a business are slim to say the least, especially if you don’t have much collateral or no business ownership experience. As such, it’s important that the seller finance the entire purchase business price or a large portion of it.

6. Don’t Be Intimidated By Business Brokers. They represent the seller, so it’s their job to present a positive buy business environment. As such, you need to take control of the deal.

When purchasing a business, it’s crucial that you acquire all the key financial and performance data which has anything to do with the business for sale. This information is your bargaining tool when meeting with the seller. You can own a business and be successful at it if you make well informed purchase business deals with the seller to limit your risk. Despite the current business climate, it’s exciting to own a business and nothing should stand in your way of realizing your dream.

Richard Parker is the President and founder of the prestigious Diomo Corporation – The Business Buyer Resource Center. His celebrated materials, seminars and consulting have encouraged thousands of aspiring business buyers from around the World to pursue their dream of buying a business.

Business Buying, Business Investment, Buying A Business, Investing In A Business, Purchase A Business

August 3rd, 2009 by Bruce

Several decades ago, a gas station was a gas station, and a convenience store was a convenience store. If someone had predicted back then that these two very different businesses would join in holy matrimony and become a fixture on America’s highways and byways, I wouldn’t have believed them.

But when you stop to think about it, it’s a marriage that makes a lot of sense. When people pull in for fuel, why not provide them with the opportunity to spend even more cash on the items that they may also want – coffee, soft drinks, snacks, and other low cost items? Maybe even a pair of sunglasses to cut the glare of the road?

So, why not jump at purchasing a convenience store when you purchase a gas station?

Well, perhaps… But before you choose what you’re going to do, you should answer these two fundamental questions:

• Question #1. If a convenience store is already part of the gas station business, is it profitable? If it’s not currently profitable, can you make it financially worth your while?

• Question #2. If a convenience store isn’t already part of the business you’re considering, does it make sense for you to add one? Bear in mind that you need not hurry to add one, if none is present. You can add one later, when it makes financial sense.

Estimating Potential Costs and Profits.

Whether or not a convenience store is currently part of the business you’re thinking about buying, here is a checklist of expenses that can assist you with evaluating the additional costs. Compare these expenses to the profits (or potential profits) and you will be able to roughly estimate a convenience store’s possible profit potential. Never accept the Seller’s figures regarding these expenses. You’ll have to look everywhere you can to produce cost estimates that you can personally verify.

Insurance – If there is already a convenience store, how much does insurance cost? Keep in mind, the level of insurance that’s already in place may not be sufficient. Speak with an insurance broker to determine what kind of coverage you really need along with the overall cost. You’ll rapidly realize that if a convenience store is part of the deal, you’re going to need quite a bit of extra coverage for liability, workers compensation for employees, and more…

Payroll – You’ll have to hire and pay employees to staff your convenience store. You may also have to pay out for benefits. Ask the Seller of the business about who staffs the store. If he or she is using underpaid relatives to staff it, it can be difficult to arrive at an accurate picture of what your payroll will be once you are the owner.

Utilities – Convenience stores need to be well lit. They also need to be heated in winter and cooled in summer. Those costs can really add up.

Retail Payment Systems – These include accounts to process credit cards, cash registers and more. If up-to-date systems aren’t in place, you will need to upgrade all of them.

Lottery Terminals – Many shoppers buy lottery tickets when they buy gasoline. Adding a lottery terminal might seem like a great way to generate income, but before you start counting on this extra income, check with your local state lottery authority to learn about the costs involved with owning a terminal.

Signage – To maximize profits, you’ll need high-visibility signage to show customers that a top quality convenience store is part of your business. If signs aren’t there, you’ll need to purchase them and put them up yourself.

Paving, Snow Removal, Landscaping and Other Associated Costs – Customers need to be able to park in convenient locations and walk safely to your store. Those points make it quite a bit more expensive to run a gas station and convenience store combination than it otherwise would be to run a gas station by itself.

Questions to Ask the Seller If a Convenience Store Is Already Part of the Business You’re Buying:

• What is your current inventory and what is it worth? (Remember not to count perishable items such as dairy products or returnable products such as magazines.)

• How much profit have you been generating from convenience store sales?

• Please provide an approximate breakdown of your revenues between gas sales and retail, and a further breakdown of the retail sales.

• Is your convenience store a franchise that is separate from your fuel operations?

• Do you operate the convenience store as well as the gasoline station part of your operation – or is the business split? If the operations are divided, how is that structured?

• Do you have automated inventory tracking and control systems in place?

• What products are you selling in your convenience store, and how much volume/profit is tied to each of them?

• Who are your suppliers for tobacco, beverages, coffee and all of the other retail offerings?

• Do you sell lottery tickets? What are the costs and profits?

• What hours are you open? Which hours of operation are the most – and least, profitable?

So, should a convenience store be part of the deal when you decide to purchase a gas station? Should you think about adding one, if none is already there? To find out what’s best for you, you should get a good pen and go through the checklist above. You should ensure you’re buying a station that’s profitable not only at the moment, but for many years to come.

Richard Parker is the President and founder of the Diomo Corporation – The Business Buyer Resource Center. His inspiring materials, seminars and consulting have assisted thousands of business buyers with achieving their life long dream of buying a business.

Buying A Business, Convenience Store Business, Filling Station Business, Gas Station Marketing, Local SEO, marketing locally, Selling A Business, seo for small business, Small Business Seo