Posted on Thu, Mar 11, 2010
Have you considered that in today's economy buying a business is essentially buying a job that you can never be laid off or fired from?
If you have the requisite skills and access to capital and / or financing, there could not be a more favorable time to buy a business. Most buyers today have less than $100,000 to invest, and much of this may be pulled from a 401k or home equity. A buyer's motivation is generally to gain more control over their own life and achieve pride of ownership.
What would your dream job look like? How many hours a day would you work? How long would your commute to work be? Where would you live? What would the weather be like? What would your average day be like, what kind of activities would you be performing?
It is important to ask yourself these questions, because buying a business is really the same thing as buying a lifestyle. In addition to the choice of what kind of business to buy, whether that be a manufacturing business, service business, restaurant, franchise or any other kind, there is the choice of where to buy that business.
Buying a business in Arizona offers many different lifestyle options, for example:
- Buying a business in Phoenix offers access to the nation's 5th largest city and year round warm temperatures. Proximity to Sedona, Flagstaff and the White Mountains offer weekend escapes.
- Buying a business in the White Mountains area, including Pinetop and Show-Low, affords buyers with 4 seasons and mountain and lake sports.
- Businesses for sale in Tucson or Southern Arizona offer buyers less extreme weather than Phoenix, access to Mexico, and plenty of great hiking and outdoor activities.
There are many different lifestyles available to investors considering in buying a business in Arizona. We would be happy to answer any questions or point out of state buyers in the right direction to discover more facts about life and business ownership in in Arizona.
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Posted on Sat, Mar 06, 2010
In the previous post, we began a conversation about how even experienced buyers who have great familiarity with the process of buying a business need to perform rigorous analysis in support of every transaction. Regardless of how much experience they have with buying a business, there are areas where a business broker can assist a buyer in performing due diligence in order to uncover the areas where intentionally or unintentionally, a seller may have obscured the reality of the value of their business.
CASH FLOW STATEMENTS are another such area that must be carefully scrutinized, because for a buyer they are more important than either balance sheet or income statement. The buyer needs to certify that the cash flow will continue to remain positive even after having taken into account the debt service that will be necessary after the acquisition and once the non-recurring or extraordinary items have been removed.
The ability to continue producing positive cash flow is dependent upon the condition and reasonable future lifespan of the machinery and equipment of the business. Should CAPITAL EXPENDITURES become necessary to replace equipment that is dilipidated or will become obsolete in the near term, a buyer needs to know that in order to assess its impact on the acquistion price and the ongoing operation. Rapidly growing companies may also continue to need capital investments in productive capacity that exceed the normal rate of depreciation, which would have an impact on both future projections and acquisition price.
We invite you to visit the experienced buyer page in the resources section of our Web site for more information on all aspects of buying and selling a business in Tucson or Southern Arizona.
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Posted on Fri, Mar 05, 2010
As Tucson business brokers dealing with Arizona businesses for sale, we frequently deal with experienced buyers, or even professional acquirers, whose level of experience and familiarity with the acquisition process may give them an advantage over an owner who plans to sell a business for the first time. That said, regardless of a buyer's level of experience, the facts about a transaction need to be uncovered by thorough and rigorous analysis in each and every case. For there are many areas where a seller, whether intentionally or unintentionally, may have obscured the reality of the value of the business for sale in question. We plan to comment on these over the course of this and several subsequent posts to this blog.
The first of these areas is INVENTORY. It is paramount for a buyer, or representing business broker, to ask the right questions about inventory, such as:
- how often and how it is counted?
- how it is valued, by cost or fair market value?
- what percent of it is obsolete
- how many years of worth of obsolete inventory there is?
- what kind of reserve policy is in place to cover for the inevitable need to write down a portion of inventory?
Another area that business buyers ought to delve into carefully is DISCRETIONARY COSTS. Often, when preparing to sell a busines, the owner will scale back on discretionary spending in order to maximize profit in support of an inflated asking price. Areas that frequently get the axe are:
- marketing: advertising, promotion, public relations, etc
- maintenance: equipment and facility
- research and development
- technology upgrades
A buyer and his or her representing business broker must ask probing and persistent questions in order to understand the correlation of each these categories of expenditure to the company's long-term competitiveness.
While we are Tucson business brokers working with Arizona businesses for sale, we want to serve as a resource for business buyers and sellers anywhere, regardless of location. Check out the resources section on our Web site for more information. And leave us a comment below if you want to discuss this post.
If you'd like more information on this subject, please
Contact Us.