By Peter Siegel, Founder of BizBen.com (California Businesses For Sale), the BizBen Network
When you buy a small business, you want to be successful. But to do that, you must be able to look objectively at the company and determine whether or not it is a business that will be able to grow into the future. Many small businesses have succeeded by being on the cutting edge at one time or another. Businesses that survive long term, growth industries, are those that can change and grow along with the changing needs of their consumer. Regardless of what the financials say, a business that is not adaptable may be at the end of its life cycle.
As you look at potential business opportunities, think about where the business is in terms of its life cycle and try to find a vision for future growth if the current owner doesn’t have a plan in place. If you’d like to know that the small business you are buying is going to be in demand for a while, consider buying one in an industry that is projected to grow. Here is my list of small business opportunities in industries that are expected to grow.
#1 – Green Construction
The construction industry was hit hard by the recession. The industry has had to suffer through consumer’s pulling back on doing large home improvements and from building new homes because they couldn’t afford to and because there was a level of uncertainty around what the future would hold. As the economy starts to improve, many consumers are still focused on ways to save money and live more efficiently so going green is becoming a priority.
Consumers aren’t the only ones interested in going green. Business owners are also following this trend as a means of being more efficient and spending less. With that, I anticipate that companies certified in creating green spaces will be in demand in the future. As more and more consumers go green, they will want their homes and their businesses to follow and the demand for companies that can provide green spaces will increase.
If you are considering buying into this industry, I recommend you know something about construction. Experience will be beneficial in running a successful business. Consider buying include construction companies certified in green building, companies that install solar panels or a green consulting company which evaluates a space and make recommendations on how to improve its efficiency. You can find businesses that are either franchises or independently owned in this category.
#2 – Fast Casual Dining
While fast food franchises still remain a popular option for meals on the go, a new trend in on-the-go eating has emerged over the last several years and I anticipate it will continue to grow into the future. The movement to fast casual dining is taking the restaurant industry by storm. Chains such as Panera Bread and Chipotle have grown tremendously since entering the market. Consumers seem to like the ability to be able to sit down for a casual meal that is better quality than fast food but not as time consuming as a restaurant.
Another trend in this industry is the birth of the food truck. We’ve been hearing about them for a while now and some food trucks have really gained quite a large following of loyal customers. Small business opportunities in this industry for you to consider buying include food trucks and restaurant franchises. Even though fast casual dining is a bit different than a full blown restaurant, you should still understand what you are getting into before you buy into this industry so do your due diligence before making any decisions.
#3 – Professional Services — Accounting, Healthcare, Consulting
As the world that we live in gets more complex, the need for professional services increases and I’m seeing a particular demand in accounting businesses, consulting, and private healthcare practices. Accounting may not be the “sexiest” occupation, but accountants and their services are in demand. As people’s finances become more complex we are seeing less do it yourself accounting and more individuals turning to a professional to help with everything from monthly accounting to annual tax preparation. Most businesses use a professional accountant in one way or another but again, as the complexity of our global economy increases, more businesses are requiring additional services from professional Accountants.
As Baby Boomers continue to age, they are creating a demand for more healthcare-related professional service businesses. This includes everything from private healthcare practices to healthcare specialists like physical therapists to home healthcare aides. The population is going to continue to age and need these services. On top of that, with the introduction of the Affordable Healthcare Act more Americans will have access to health insurance so the demand for healthcare professionals may again increase as a result.
Let’s not forget about Consultants! Starting a business and staying open is becoming harder and harder as the economy, consumers and technology continues to change. Businesses are hiring Consultants to help them navigate this unique business environment and you can find a Consultant that specializes in just about everything these days. This increasing demand for professional guidance in specific areas of business is causing this to be a growing segment of the professional services industry.
While buying a professional services practice may sound like a great idea, these are three areas where I’d definitely recommend you have experience before buying. So what I am saying is if you are a restaurant owner looking for change, buying an accounting practice probably isn’t going to be the right fit but if you’ve just become a CPA and the practice you interned at is up for sale, you should consider buying it because it is likely to be a business that will be around in the future.
When it comes to the professional services industry, many of the small business opportunities that are available for you to purchase are likely to be independently owned. Also, be aware a lot of professional practices don’t get sold on the open market. Many change hands by being passed down to family or employees so finding one for sale may be more difficult than finding other types of businesses.
#4 – Repair Services
Consumers are hesitating to buy new. Instead of replacing it, they are repairing it. For millions of Americans who are still recovering from the recession, repairing has become a way of life. Repair businesses from home improvement companies to car repair businesses have seen an improvement in their business when other companies were slowing down.
Small business opportunities in this industry for you to consider buying include home repair businesses, auto repair shops, a clothing repair or alterations business and computer repair.
#5 – Self-Help and Individual and Family Services
We have become a nation of people who are constantly trying to better than themselves. A group of people trying to do more, be more and live better, Americans are looking for help in finding out how they can be the best they can be. The result is that the self-help industry is booming, and I anticipate its growth to continue well into the future. Self-help and self-improvement initiatives started gaining momentum as early as the 1930s and today Americans spend around $11 billion on this industry. Falling into this category is everything from motivational speaking seminars, networking and wealth-building instructional DVDs, guidance books and more. This segment of the industry presents an opportunity for a solopreneur to write a book, produce a DVD or become a speaker so if you have experience and are successful in an area of life that many people struggle in, you may have an opportunity to create a small business out of it.
Also growing in popularity is the individual and family services industry. In my opinion, self-help and this industry go hand in hand because they are both focused on improving lives. When it comes to individual and family services, more and more people are going to start hiring professionals to help them get through whatever is plaguing them; drug addiction, marital problems, mental issues, etc.
This presents an increasing demand for another branch of professional service businesses that are going to grow into the future. As I said before, these are businesses that you should really have some experience in before buying one.
About The Author: Peter Siegel, MBA, is the Founder of BizBen.com (California Businesses For Sale), the BizBen Network, and is the Director of the successful BizBen ProBuy Program (90% success rate) for business buyers. He has recently published an eBook on How To Buy A California Small Business that is available online. If you need assistance in your search to buy (or finance the purchase of) a California business and would like to speak with Peter Siegel, phone him direct at 866-270-6278.Read More
Every business has to be concerned about maintaining confidentiality. When business owners are getting ready to sell their business, they often become somewhat obsessed with confidentiality.
It goes without saying that owners don’t want the word that they are selling to spread to the public, employees or most certainly their competitors. Yet, there is something of a tug of war between the natural desire for confidentiality and the desire to sell a business for the highest amount possible. At the end of the day, any business owner looking to sell his or her business will have to let prospective buyers “peek behind the curtain.” Let’s explore some key points that any good confidentiality agreement should cover.
At the top of your confidentiality list should be the type of negotiations. This aspect of the confidentiality agreement is crucial because it stipulates whether the negotiations are secret or open. Importantly, this part of the confidentiality agreement will outline what information can be revealed and what cannot be revealed.
Also consider the duration of the agreement. Your agreement must clearly define how long the agreement is in effect. If possible, your confidentiality agreement should be permanently binding.
You will undoubtedly want to outline what steps will be taken in the event that a breach does occur. Having a confidentiality agreement that spells out what steps you can take if a breach does occur will help to enhance the effectiveness of your contract. You want your prospective buyers to take the document very seriously, and this step will help make that a reality.
Special considerations should also be clearly defined for the business in question. Patents are a good example. A buyer could learn about inventions while “kicking the tires,” and you’ll want to be quite certain that any prospective buyer realizes that he or she must maintain confidentiality regarding any patent-related information.
Don’t forget to include any applicable state laws, especially if the prospective buyer is located outside of your state.
A confidentiality agreement is a legally binding agreement. All parties involved must understand this critical fact. Investing the money and time to create a professional confidentiality agreement is time and money very well spent. An experienced business broker can help you navigate not just the confidentiality process, but also the entire process of buying and selling a business.
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Goodwill can enhance the value of your business, but what does the term mean when buying or selling a business?
Usually, the term “goodwill” is a reference to all the effort that a seller puts into a business over the years that he or she operates that business. In a sense, goodwill is the difference between an array of intangible, but important, assets and the total purchase price of the business. Don’t underestimate the value of goodwill in the long-term and short-term success of any given business.
Goodwill is defined by Investopedia as an intangible asset associated with the purchase of one company by another. An intangible asset can be thought of as asset that is carried on the balance sheet, and it may include a company’s reputation or a recognized name in the market, according to the M&A Dictionary. If a company is purchased for more than its book value, then the odds are excellent that goodwill has played a role.
Goodwill most definitely contrasts and should not be confused with “going concern value.” Going concern value is usually defined as the fact that a business will continue to operate in a fashion that is consistent with its original intended purpose instead of failing and closing down.
Examples of goodwill vary. Some of the more common and interesting examples:
- A strong reputation
- Name recognition
- A good location
- Proprietary designs
- Trade secrets
- Specialized know-how
- Existing contracts
- Skilled employees
- Customized advertising materials
- Technologically advanced equipment
- Custom-built factory
- Specialized tooling
- A loyal customer base
- Mailing list
- Supplier list
- Royalty agreements
In short, goodwill in the business realm isn’t easily defined. For example, standards require that an outside expert annually value companies which have intangible assets, including goodwill. A business owner simply can’t claim anything under the sun as an intangible asset.
Understanding what is a real and valuable intangible asset or example of goodwill can be a key factor in the buying and selling process. Whether you are buying or selling a business, you should leverage the know how of seasoned experts. An experienced business broker will be familiar with goodwill and how to properly evaluate the worth of it in setting a valuation for your business. A business broker guide you in both understanding and presenting goodwill variables, as well as steer you though the buying and selling process.
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Leases should never be overlooked when it comes to buying or selling a business. After all, where your business is located and how long you can stay at that location plays a key role in the overall health of your business. It is easy to get lost with “larger” issues when buying or selling a business. But in terms of stability, few factors rank as high as that of a lease. Let’s explore some of the key facts you’ll want to keep in mind where leases are concerned.
The Different Kinds of Leases
In general, there are three different kinds of leases: sub-lease, new lease and the assignment of the lease. These leases clearly differ from one another, and each will impact a business in different ways.
A sub-lease is a lease within a lease. If you have a sub-lease then another party holds the original lease. It is very important to remember that in this situation the seller is the landlord. In general, sub-leasing will require that permission is granted by the original landlord. With a new lease, a lease has expired and the buyer must obtain a new lease from the landlord. Buyers will want to be certain that they have a lease in place before buying a new business otherwise they may have to relocate the business if the landlord refuses to offer a new lease.
The third lease option is the assignment of lease. Assignment of lease is the most common type of lease when it comes to selling a business. Under the assignment of lease, the buyer is granted the use of the location where the business is currently operating. In short, the seller assigns to the buyer the rights of the lease. It is important to note that the seller does not act as the landlord in this situation.
Understand All Lease Issues to Avoid Surprises
Early on in the buying process, buyers should work to understand all aspects of a business’s lease. No one wants an unwelcomed surprise when buying a business, for example, discovering that a business must be relocated due to lease issues.
Summed up, don’t ignore the critical importance of a business’s leasing situation. Whether you are buying or selling a business, it is in your best interest to clearly understand your lease situation. Buyers want stable leases with clearly defined rules and so do sellers, as sellers can use a stable leasing agreement as a strong sales tool.
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Buying a business can be an exciting prospect. For many prospective business owners, owning a business is the fulfillment of a decades long dream. With all of that excitement comes considerable emotion. For this reason, it is essential to step back and carefully evaluate several key factors to help you decide whether or not you are making the best financial and life decision for you. In this article, we’ll examine five key factors you should consider before buying a business.
What is Being Sold?
If you hate the idea of owning a clothing store, then why buy one? The bottom line is that you have to have a degree of enthusiasm about what you are buying otherwise you’ll experience burnout and lose interest in the business.
How Good is the Business Plan?
Before getting too excited about owning a business, you’ll want to take a look at the business plan. You’ll want to know the current business owner’s goals and how they plan on going about achieving those goals. If they’ve not been able to formulate a coherent business plan then that could be a red flag.
You need to see how a business can be grown in the future, and that means you need a business plan. Additionally, a business plan will outline how products and services are marketed and how the business compares to other companies.
How is Overall Performance?
A key question to have answered before signing on the bottom line is “How well is a business performing overall?” Wrapped up in this question are factors such as how many hours the owner has to work, whether or not a manager is used to oversee operations, how many employees are paid overtime, whether or not employees are living up to their potential and other factors. Answering these questions will give you a better idea of what to expect if you buy the business.
What Do the Financials Look Like?
Clearly, it is essential to understand the financials of the business. You’ll want to see everything from profit and loss statements and balance sheets to income tax returns and more. In short, don’t leave any rock unturned. Importantly, if you are not provided accurate financial information don’t hesitate, run the other way!
What are the Demographics?
Understanding your prospective customers is essential to understanding your business. If the current owner doesn’t understand the business, that is a key problem. It should be clear who the customers are, why they keep coming back and how you can potentially add and retain current customers in the future. After all, at the end of the day, the customer is what your business is all about.
Don’t rush into buying a business. Instead, carefully evaluate every aspect of the business and how owning the business will impact both your life and your long-term financial prospects.Read More