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Category Archives: Buying a Business

Business Planning in a Down Economy

By | Business By The Book, Buying a Business, Buying a Franchise, Growing a Business, Growth Strategy, Increasing Profitability, Investing in Small Businesses, Planning, Starting Up, Valuing a Small Business, Writing a Business Plan | No Comments
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Q: Should the economic forecast be an important factor in determining the type of business to start or acquire? A: Most businesses that are acquired or started are done so with a long time horizon in mind. Add to that the fact of the typical continuous cycles of any economy: (downturn, bottom out, upturn, and peak). Given that long-term view and the necessary expectation of economic cycles that almost defy the ability to forecast the timing of those trends, it’s more important to pick an industry/market in which you have loads of experience and create a superior offering with a…

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Managing Uncertainty When Buying a Company

By | Business By The Book, Buying a Business, Planning | No Comments
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Q: I’ve read through your blog and appreciate the information you’ve presented in buying a business. I wonder if you might elaborate on how the pricing of an acquisition of a business should be adjusted in light of the increased risk present under our current economic environment. Are there any standard, forward-looking adjustments that should be made? A: There are no standard forward-looking adjustments, but there are a few good ways that buyers often manage the risk you describe. First, a little bit about the Seller’s motivation. Sellers will often offer up their plan for the next year, but they are…

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Determining the Purchase Price When Buying a Company

By | Business By The Book, Buying a Business, Finance | No Comments
Acquisition Valuation

Q: I am considering acquiring a company. How do I determine the value and price I should pay? A: One of the most sensitive parts of an acquisition process is usually the valuation of the business. Sellers will often feel their company is much more valuable than the market would indicate. Sometimes sellers will have a certain price they want, while other times their expectation was set by the price fetched by a friend’s business when they sold. Much of this expectation gap has to do with the perceived value of the business by the owner, but part of the…

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Trying to Buy a Retail Store

By | Business By The Book, Business Development, Buying a Business, Investing in Small Businesses, Ownership & Purpose | No Comments
Retail Store

Q: I am negotiating to buy a retail business and would like your advice. I’ve listened to your “Before You Launch Your Business” presentation — which was very good — but I’d like some help thinking through buying this business. The business is a boutique in an upscale part of town that has a very loyal customer base. The owner has relocated out of state and is desperate to sell the business, which is currently being run temporarily by his aged father. I actually know the business fairly well because I sold to the business for years as a manufacturer’s sales…

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Expect Negative Surprises When Acquiring a Business

By | Accounting, Business By The Book, Business Development, Buying a Business, Financial Reporting, Growth Strategy, Investing in Small Businesses, Negotiations, Ownership & Purpose, Selling a Small Business, Valuing a Small Business | No Comments

Some aspiring entrepreneurs will get started by buying an existing small business and many business owners have growth plans that include buying up other businesses to add larger chunks of growth via acquisition (mergers and acquisitions or “M&A” growth as opposed to “organic” growth). And if you are a business owner, you will most likely at some point sell your business. So here’s a few tips to both sides of the transaction… While it may not be statistically significant in terms of all the deals ever done, in my experience of negotiating with roughly 300 prospective sellers, signing approximately 75 letters…

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Starting Your Business – Part 5

By | Business By The Book, Buying a Business, Buying a Franchise, Coming Up with an Idea, Planning | No Comments

In the initial post of this series, I suggested a step-by-step process for launching a business. This post will be a continuation of Step 4 – Launch, where we explore the benefits and challenges of various methods of achieving a startup launch. (See Part 2, Part 3, and Part 4 for other posts on the process). Launching the Best Opportunity As mentioned in our previous installment, this is the phase in which you are prepared to launch the best opportunity that was fully vetted in the earlier steps of Define, Generate, and Evaluate. In the last article, we discussed the four core requirements for a launch and in this…

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Starting Your Business – Part 3

By | Business By The Book, Buying a Business, Buying a Franchise, Coming Up with an Idea, Planning, Self Evaluation, Starting a Family Business, Starting a Part Time Business | No Comments

In my initial post in this series I suggested a step-by-step process for launching a business. This article will focus on Step 3 – Evaluate, where you evaluate the opportunities you’ve identified. (See Part 2 of this series if you missed my explanation of Step 2 – Generate). Evaluating Opportunities – In this phase, the ideas generated in Step 2 are evaluated using the criteria established in Step 1. By using this methodical process of starting a business – and with God’s guidance – you will hopefully develop a high-quality business idea that can be pursued with confidence and enthusiasm. In this phase you want to eliminate bad…

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Should I Buy Into This Franchise?

By | Business By The Book, Buying a Business, Buying a Franchise, Organization & Strategy, Self Evaluation, Starting Up | No Comments

  Q: I am a Christian and college graduate with eighteen years of financial services experience. I am considering a franchise opportunity in senior care, but the franchisor (a friend) has yet to document the entire business opportunity and is offering me a discounted beta rate to be his first franchisee. Can your service help me assess this investment? Also, is it a mistake to venture into an industry I have no experience in? My wife is a new Registered Nurse, but with no experience either. A: First of all, franchises are typically a good way to go for an inexperienced entrepreneur…

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How Not to Buy a Company

By | Business By The Book, Business Software, Buying a Business, Finance, Financing a Small Business, Investing in Small Businesses, Organization & Strategy, Tech, Valuing a Small Business | No Comments

A few years ago I was looking at a business plan involving software that was several years old and was being repositioned to sell into a new market segment. While reviewing the plan, I was immediately transported back in my memory to a good number of years ago when I acquired a software company and learned many painful lessons along the way. It was my very first acquisition, my very first time in the software industry, and my very first time as a CEO. (Looking back on that entire experience I can now see the foolishness of tackling a new…

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