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Looking for 1st time Small Business purchase and move to new location.

I'm interested in buying a small business and moving to a new location.
I currently live in New England and work in Corporate IT.
My plan, (In Theory), is to find a small business in a location which is more temperate and appeal to me more. Places like Austin TX, Athens GA, etc come to mind. Better climate, etc.
I've never owned a business so want to be conservative in my purchase and make sure I utilize services to insure that my lack of business knowledge does not lead me into a poor decision.
I see business valuation services, which I feel look at financials, but I am curious if there are services which would be more along the lines of guidance and assistance with this type of combined move/purchase.
Or any other advice is of course greatly appreciated.
-ed
(P.S. I am looking to 'rollover' my 401K for the purchase so limited to ~$150K).

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Answers (11)
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I CAN GIVE YOU ALL THE HELP YOU NEED......Try a deli and/or diner. It's hard work, but good rewards and fun. Plus in the right area it is an excellent investment that will grow. And you can do this anywhere there are people. We doesn't like to eat great food? Also, have 2 possible locations in Florida under a different name that may be available together or separate.

Nov 8, 2009
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Dallas County, TX

Ed,

We are similar in our goals, as I am, coincidentally, in IT, live in TX, and have been seriously looking for a small business for 5+ months. Although I am not quite there, that is, have not yet found the right business, I feel I've learned a great deal in the process.

In my research on business valuation services, I've found many flavors. Some will simply do a comparative based on similar business (e.g. restaurants) in the same geographical region. Some will review financials and value as one would an annuity. Some combine these methods with an industry/regional expertise and, in theory, get closer to the "true" value. In your case, it sounds like finding a firm that can demonstrate industry expertise relevant to your potential acquisition is the best direction.

While I see the value in such a service, I strongly recommend that you hold off and do your own review of financials and operations before investing in a valuation service. Of the several businesses I've had a chance to dive into, including many that I was absolutely convinced was "the one," your investigation into operations and careful review of financials will uncover many things not in even the most detailed prospectus. Some examples of red flags I've encountered include:
- Owners who include the supposed "growth opportunities" in their view of a business' worth. There is no reason whatsoever to pay for the future. You pay for the present performance and a history of reliable business. You are already going to pay for the future in the form of your time, money, planning, etc. If future value was indeed "simple," the current owners would have likely tried that path.
- Underrepresenting what it costs to run the business. Example: a seller says that their business generates $X in cash flow, but declines to mention that his family works in the business and that they are not paid a salary. You have to replace those people, a cost that eats into owners benefit.
- Revenue, cash flows, etc. shown for 2008, but 2009 YTD shows significant decline not reflected in a lower sale price.

I am not discouraged, nor should you be, because there are good businesses out there. It just takes a while to find a good one. Notice I said "good," not "great," because I think one would run around forever if you were rigid in all your criteria thinking that there is a perfect business out there.

In the meantime, I do recommend lining up a list of trusted experts: legal, accounting, and if you want, a business valuation firm. First, though, spend some time writing down the criteria you have to guide you. Put as many or as few factors down, and change as needed, but do it. Otherwise you will never know when the right business is in sight. Clearly you've thought about some of this, but need to document it. Example criteria: cost, financing limits, rates; industries; location(s); expertise you bring (financial, marketing, etc); lifestyle criteria (7 days a week business? weekdays only?).

Best of luck,

Paul M.

Oct 19, 2009
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Franchise Advisory Group
PA

Ed,

I recommend you look into auto repair business, child care business, medical and coffee sales. All 4 have proven to be recession resistant and do provide services we need to maintain our normal lives. I just bought a Tilden Car Care Franchise in Philly and they have great locations in both TX and GA. All the industries I mentioned you can buy for $150K, especially Tilden. I'll be more than happy to discuss this and any other Franchise with you. david@franchiseadvisorygroup.net 888-241-6629

Oct 19, 2009
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The BAF Group LLC
MD

Ed, call me at (410) 715-0700 or e-mail me (combroker@bafgroup.com) with your phone number so we can talk this through, please. I think I know where you are going, but we need too much back and forth to give you a coherent answer, I think.

Oct 19, 2009
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Austin County, TX

Sorry I was not clear.
When mentioning the Franchise and my thoughts on that, I was speaking about starting new. I am looking at business for sale which include established franchises.

I understand what you mean Don. I think unfortunately at the moment I can't exactly answer what I need. I'm in the process of discovery. Looking at everything from multi-families to other business.
Basically I'm looking to see what is available, and then try to match that to my personality.
I'm drawn specifically to things with repeated income, rentals or services which people sign up for. I could be wrong but psychologically it gives me a feeling of stability which I think I'll need when making such a large transition and putting my savings at risk.
After I have become successful, (for that will happen :) ), and acquired additional capital I'm hoping to move onto other more risky opportunities for the challenge and reward.

Don - Would it be feasible to leverage yourself in a fashion where I can present specific questions upon a specific business? In this way I can try and 'do it all' - create a business plan, etc. Then utilize yourselves for specific areas I am missing, and/or for review process to highlight items I have missed.

To use your example below "Is it in terms of the lawn business itself, as a future?". This might be a question I would like to pose to someone with more experience then myself. I can look online, attempt to do all the correct research, contact the chamber of commerce, etc. But in the end I'd be concerned I missed something critical.

Oct 19, 2009
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The BAF Group LLC
MD

Ed, the Accounting was an example. And I understand your point about the expense in purchasing a Franchise, although there are a number of Franchises that might fit into your financial niche. Someone like David Dolitsky (below) would be better to answer that question for you. But keep in mind that there are mature Franchises that can be purchased as mature entities; if you buy from another Franchisee, you will still have the training and support. In terms of price, there is little difference between buying an ongoing Franchise, versus an ongoing independent business.

The key is again in knowing the exact things you want to have answered. Is it in terms of the lawn business itself, as a future? In terms of putting together a Business Plan's financial model? In determining whether the price is a good one? What exactly are you needing to know?

Looking for a business location to run it from is almost a non-issue. That can be done easily and quickly, in most areas.

My suggestion is that you get yourself a book on writing a Business Plan. My favorite is "How to Really Create a Successful Buisness Plan", by David Gumpert, and published originally by Inc. Magazine. (I do not get a commission off sales of this book, but I should!) A Business Plan is a tedious, boring thing to do, and most people don't do it, hate to do it and then regret not doing it!!!

A Business Plan will help you identify specific concepts you need to work through. We do them, but we don't do them FOR someone like you; we do them WITH someone like you, because if we did it FOR you, you would not learn what you need to know, in order to make decisions about the business you want to start or buy.

Oct 19, 2009
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Austin County, TX

Thanks David. Currently I am working with someone from the entrepreneurs source on the franchise end.

Oct 19, 2009
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Franchise Advisory Group
PA

Ed,

I'll be more than happy to help you evaluate Franchises and guide you through the process. Please feel free to contact me at your earliest convenience. david@franchiseadvisorygroup.net or 888-241-6629

Oct 19, 2009
Jon Holmquist
Edgemaster Model 400 sharpener
President
Marion County, OR

Hello Ed, Thank you for checking out our web site. If you are interested or not I would like to know what you thought of the site from your point of view. I was going to ad a blog to the site but was overruled by other owners. I am not afraid to hear what people say, so please give me your honest opinion.
Jon at Edgemaster Mobile Sharpening.

Oct 19, 2009
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Austin County, TX

Thanks Don.
I believe I understand what you are saying.
Some things I'm really not worried about - such as your example with accounting. I'm not an account so I expect to utilize one.
I am looking at franchising - my problem with franchising is that it is a larger investment, I really need to have 1-3 years of living expenses saved, and there is no starting client base.
What I would be looking for is someone who when I find a company I am interested in can look at it to find anything thats "not right" or that I am missing. Help and guidance in research such as an objective 3rd party view of competition and growth potential.
I have contacted SCORE and will be using other resources I can find, but was thinking that there might be a business model someone has that works in this avenue.
For instance I have asked for some information on a lawn care business which supposedly has great growth potential, (as clients are being turned away), and is being sold as the owner is focusing on the other half of the business.
I'm interested in this business but my two challenges are:
1) Doing the research in the area as I am not familiar with it.
2) Locating a business location to run it out of, for the same reason.

- Again, Thanks for you assistance.

Oct 19, 2009
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The BAF Group LLC
MD

Ed, there are a lot of ways to go. Valuations are fine, but even those can be misleading. We were referred to a business owner by a Valuation Company, but when we compared the Valuation to what the SBA would permit based on Cash Flow the Buyer would experience, there was about a 30% difference.

You can contract a variety of consultants to determine what you want to know. We do a certain amount of that, ourselves. But that depends on what you want the Consultant to do for you, or you would end up being charged over a long term basis, with no end really in sight. And that is not to say the Consultant is leading you around by the nose - but if he/she does not know what to tell you, the only thing any Consultant can to is perhaps play hit-and-miss, until you provide further direction. (Although, any Consultant SHOULD try to work on that kind of targeting with you, from the beginning!)

And as for your lack of knowledge, perhaps a Franchise would be what you need. The Franchisor's training and systems can help with some of the areas in which you might see yourself lacking. But again, YOU REALLY NEED TO KNOW WHAT YOU DON'T KNOW, in order to make that decision. If, for example you feel your real need is only in accounting for small businesses, you don't need a Franchise to do that for you; you need an Accountant.

Let me know if this is not clear.

Oct 19, 2009