HELPING PEOPLE BUY & SELL BUSINESSES

Buyer FAQ

Why buy a business and not start one from scratch?

Wouldn’t it be cheaper to start a business then purchase one?

What is my cost to use a Business Broker?

What professional assistance is needed to buy a business?

What types of businesses should I look at purchasing?

How are asking prices determined?

I have been searching for a business to buy, why are brokers/sellers not getting back to me?

What forms of financing are available?

What can Florida business brokers do, and what can they not do?

How does it work with the lease?

What typically gets transferred in the sale and what does not?

Aren't most businesses that are up for sale, the ones that are losing money?

What is Due Diligence and when does it start?

Where do I start when I decide I want to buy a business?

What typically gets transferred in the sale and what does not?

Why buy a business and not start one from scratch?

There are many advantages to buying a business than from trying to start one from scratch. One of the biggest factors to consider is that 80% of businesses fail in the first 5 years. Buying an existing business greatly increases your chances of success, protecting your investment. It can also take two years or longer for a new business to turn a profit. Most of what you would be buying is the “goodwill” of the business or the customer/client database. Instead of not knowing when you will start making money from your start up business, when you purchase a business you should start taking money home immediately. Initially a new business requires an extreme amount of time investment to get the business off the ground. Although you will need to work hard when buying an existing business, it should not have to be as time extensive. Usually when you purchase a business rather than starting one, it is easier to get a bank loan because there is a track record of how the business has performed.

Wouldn’t it be cheaper to start a business then purchase one?

The initial start up costs might be cheaper when starting a business rather than purchasing one, over the long haul purchasing a business could be more cost effective. Starting a business might require an infusion of cash on a regular basis until the business can support itself. This could take months, years or for many new businesses they never turn a profit and are forced to go out of business. When purchasing an existing business you should start receiving a pay check and/or a dividend on the business immediately. Over a period of time, purchasing a business can be much less expensive and have a much better return on your money, not to mention a large reduction of risk.

What is my cost to use a Business Broker?

Zero. There is absolutely no cost to use one of our Business Brokers as our compensation is in the form of a commission earned ONLY after a closing happens when a Buyer and Seller is brought together. The commission is payable out of the purchase price in the business, and this comes from the Seller. It is important that you do not take advantage of a Business Broker, and the more specific you are in conveying your needs, interests, financial qualifications, and experience- the more fruitful your relationship will be with your Business Broker. It is our job to educate you about the buying process, and to help find a business that not only works for you- but offers a great opportunity for continued success.

What professional assistance is needed to buy a business?

Buyers take different approaches to the types of professionals use and in what capacity. Some like to “do it on their own” without any professional assistance. When you work with Boss Group as your business broker we will recommend that you use the assistance of an attorney to review such legal documents as purchase contracts, leases and the closing documents and other contracts. We also suggest that you use a CPA/accountant that specializes in financial due diligence to verify to make sure that the business is performing financially as the seller claims. Depending on what your circumstances are, you may also want to speak to a loan officer, business appraiser or a commercial building appraiser among others.The extent of your professional guidance is up to you as the Buyer. But remember, a few extra thousand dollars in professional guidance may prevent you from making a devastating financial move that a professional could prevent. PLEASE NOTE: Boss Group International LLC are Florida Business Brokers; our agents, staff, employees and sub-contractors are neither attorneys nor accountants and cannot and will not provide legal or financial advice.

What types of businesses should I look at purchasing?

The best businesses to look at purchasing should be in industries that you have experience, talent and educational background in. It is hard enough owning and operating a business. To do so without knowledge of that type of business is setting you up for failure. You should also make sure that you have sufficient cash reserves to operate the business you purchase. Look in a price range that will allow you to have extra funds in case of a business emergency such as failure of a major piece of equipment, uncollectible accounts receivable or an unforeseen temporary decline in business.

How are asking prices determined?

The seller of a business ultimately decides the asking price of the business. Business brokers will work with sellers to determine what the business will most likely sell for. Using the financial information provided by the Seller, a business broker will re-cast the financials in order to determine what a buyer would be making from the business if the business continues to perform in the same manner as the seller states the business has operated. This recasting includes the net profit of the business plus the following; owner’s salary (assuming a single buyer will work the business full-time), any loan payments seller is paying (businesses are usually sold free and clear, seller paying off any loans the business may have at the time of closing), depreciation, amortization expense, any non-essential business expenses and any benefits the company is paying on behalf of a seller such as health insurance. The above recasting of the financials results with what’s called an “adjusted net”. Using rules of thumb in combination with sales history of similar-like businesses a business broker will provide a “fair market valuation” based on the adjusted net and/or gross sales of the business. The fair market valuation that a business broker provides to a seller may or may not be the asking price the seller decides to list the business at. In the end, the final price will be determined by how much the seller is willing to sell for and how much a buyer is willing to buy the business for. This is called an “arm’s length transaction”. This is a transaction in which the buyers and sellers of a product will act independently and have no relationship to each other. The concept of an 'arm's length transaction" is to ensure that both parties in the deal are acting in their own self interest and are not subject to any pressure or duress from the other party.

I have been searching for a business to buy, why are brokers/sellers not getting back to me?

There are many statistics that demonstrate that 95%-99% of buyers that inquire about buying a business never end up purchasing a business. Unfortunately due to this, there are many brokers that take a long time to respond to a buyer and in extreme cases may not contact all their buyer inquires. At Boss Group, we respond quickly to all buyer inquiries. If you decide that the particular business you were interested does not meet your needs, we can help you create a “buyer package” so that you will be considered a “serious” buyer by other Florida brokerage firms. Most of the time just a Boss Group Broker calling the other brokerage company on your behalf will result in you being considered a serious buyer by the other company. Many times we can get more information and quicker than you calling the other company on your own. Remember, it does not cost you anything to use a Boss Group Florida Business Broker. In fact we can save you money, time and many headaches.

What forms of financing are available?

There are several other financing options available to buyers, including conventional and Small Business Administration loans. Sometimes a seller will help finance a portion of the sales price. Boss Group business brokers can work with you to explore your various options and help you to obtain financing if you qualify.

What can Florida business brokers do, and what can they not do?

Florida business brokers can help you identify businesses for sale that best suit your experience, skills and talents. We can present businesses for sale that meet your criteria, help in the negotiation of the contract, help secure financing, guide the transaction to closing and help ensure an easier transition of the business. As business brokers we perform many activities to help you successfully acquire a business. However, we are neither attorneys nor accountants and therefore cannot provide you with legal or financial advice.

How does it work with the lease?

Sometimes the seller’s lease is assigned to the buyer with the landlord’s approval and sometimes the seller is released from the lease, with a new one being executed for the buyer at the time of closing.

What typically gets transferred in the sale and what does not?

Typically the asking price of the sale of a Florida business includes all the furniture, fixtures, equipment, inventory, and goodwill. All loans are paid off at the time of closing so that the assets are conveyed to a buyer free and clear. Money in bank accounts, deposits and the accounts payable are usually not included in the asking price. Accounts receivables are usually not included, although in some circumstances this might be necessary in order to meet the criteria of a financier.

Aren't most businesses that are up for sale, the ones that are losing money?

It is a common misconception to think that if a business is up for sale, that it must be losing money. While this often IS the case, there are many motivational factors that exist giving a Seller reasons to sell your business. It is important that before you make a judgement, that you analyze the full picture of a business, and understand the owners’ story. The most common reason a Seller lists their business is illness or sickness. Other common factors include retirement, martial or family issues, relocation, other business interest, or simply fatigue and/or burnout. Every Seller has their own motivation to sell their business. Furthermore, if the business actually is losing money, it doesn’t mean that it will continue to with a new incoming Buyer. Often times the reason a business may not be profitable is due to poor management, lack of knowledge of the industry, poor habits, and many other factors that may exist based on the current owners.

What is Due Diligence and when does it start?

Due Diligence is a major part of the process of buying a business is verifying income and financial statements provided to the Buyer. This is essential in making sure the Buyer and Seller are clear on what items are transferred in the transaction, as nobody wants to be surprised at or after the closing. Parties often have their CPA’s participate in the Due Diligence process, especially once an offer has been accepted. After an Offer to Purchase, or Letter of Intent (LOI) and it has been accepted, the major part of the due diligence process will begin. There are certain items that are conveyed to the Buyer prior to submitting an offer that involve a company’s financials, however the most intimate items are typically not disclosed until an offer has been received. Due Diligence includes reviewing of the books and records of the business, counting inventory, surveying equipment, and many other items. While there are standardized lists of the items that are usually discussed in Due Diligence, this is the Buyer’s opportunity to evaluate ANY area of the business to ensure a high level of comfort about the overall picture of the business prior to closing. All purchase contracts submitted by our Business Brokers will protect the Buyer with a contingency in which if the Buyer is not happy with the results of the due diligence, that his/her escrow deposit monies are fully protected, and there will be no financial burdens on behalf of the Buyer allowing the Buyer to back out of the contract.

Where do I start when I decide I want to buy a business?

Of course, you can begin the search on your own (as you probably already have). There are plenty of websites and resources to begin your journey to locate a business that fits your needs- or you can reach out to a professional Business Broker for assistance.

What typically gets transferred in the sale and what does not?

Typically the asking price of the sale of a Florida business includes all the furniture, fixtures, equipment, inventory, and goodwill. All loans are paid off at the time of closing so that the assets are conveyed to a buyer free and clear. Money in bank accounts, deposits and the accounts payable are usually not included in the asking price. Accounts receivables are usually not included, although in some circumstances this might be necessary in order to meet the criteria of a financier.