Buying a business, especially one that is well established, is better than starting from scratch
I bumped into Bill (name has been changed) the other day at the gym. I hadn’t seen him for a few years and he hurried over to see me. As I greeted him, the next words out of his mouth were, “Dave, you saved my life when you sold my business!”.
I am not sure if he meant this literally or figuratively, but I could see that his lifestyle was completely different from when he was running his business. He was healthy, happy, and content.
This was a big change from the Bill I had worked with seven years ago when he asked me to help him sell his business after working with a business broker for over a year with no success. At that time, Bill, in his late 50s, was tired, frustrated, and overworked. He wanted to move on with his life but couldn’t because he was chained to the business. I could see that his business was making money and had the potential to grow, but at the same time, Bill was ready to tap out.
I went to work building a prospectus of the business, added in the financials and built a package that prospective buyers would find interesting. Then I started marketing the business. While most businesses take longer to sell, Bill’s business was in an industry where there seemed to be a considerable number of prospective buyers, and we had multiple potential buyers.
We advertised it in the $600k range, but because of the way the sale was structured, Bill ended up taking home even more than that. Bill was happy. The new owner told me he was able to grow the business substantially and paid the debt incurred to buy the business off within two years. He had the energy that Bill had been lacking.
Right now, many business owners in their 50s, 60s and 70s are aging out of their businesses and ready to move on. These sellers are open to creative financing and, in many cases, are bank financiable, usually with the BDC, because of their long profitable history.
Why would you buy a business like this rather than start a new business?
- They have a history of success and loyal customers. You might think you can start a business and get customers within a short period of time, but I can tell you from experience that this is easier said than done. Most businesses take three years of hard work to break even. Buying an already-established business can save you years of hurt and heartache.
- Training: Successful business owners want to see that their business continues to flourish and are willing to train you as you take over. This will save you years of struggle and thousands of dollars in courses to get you up to speed.
- Experienced staff: Many established businesses come with experienced staff trained to work. They already have relationships with customers and suppliers and can keep your business running and on track without you trying to find labour.
- Vendor financing: In many cases, if a business owner can sell their business, they may be required to finance a portion of your purchase. They are often willing to do this (usually with some security) because they know the business has the cash flow to pay off the loan.
Men like Bill are ready to sell their businesses for very reasonable prices so that they can move on with their lives. The result can be life-changing and perhaps life-saving for them. This leaves opportunities for a younger generation ready to take the business to the next level.
If you are looking to get into business or diversify your business portfolio, there are many opportunities right now that you can buy to generate wealth for you and your family for years to come.
You just need to keep your eyes and ears open and have conversations with aging entrepreneurs.
Dave Fuller is a Commercial and Business Realtor, an award-winning business coach, and business author.
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