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Buy An Existing Business or Start From Scratch? Which To Choose?

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Buy An Existing Business or Start from Scratch? December 21, 2018  by  Michael Shea PA So you want to own a business. The freedom, autonomy, and rewards are attractive. So where do you start? You can start a  side hustle , buy a  franchise , or buy an  existing business.  With so many options available to you how do you know which to choose and what are the pros and cons? As a broker, I have seen each of these options play out both positively and negatively.  The side hustle allows you to hedge risk and make some money “on the side” but the time it takes to scale to actual “business” status is long.  Franchises bring proven processes, resources, and often brand power.  It requires more capital and you need to be comfortable with the restrictions and ongoing costs associated with being in “partnership” with a master franchisor. Finally, the one I think represents the best opportunity on many levels is the purchase of an existing business...
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Confidentiality in the Business Sale and Why is it so Important

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A close up of the tab from a confidential file folder. When you are buying or selling a business confidentiality is one of the most important factors.  Now to the novice negotiator, buyer or seller with a lack of experience or understanding of all the things that can go wrong you may find that odd but let me explain. First….the sale of a business is a private matter and the only people who should be involved are those necessary: Buyer, Seller,  Broker  if there is one,  CPA’s , and  Legal Counsel .  That’s it.  No one else has a need to know.  As a seller who spends a lot of time with employees, there is often some emotion and misguided feelings of emotion/loyalty borne out of concern for your staff. But I would charge that to be misguided.  Here is how sellers should look at the deal:  Employees should be focused on their job and job alone.  The sale is to be handled by the players hired to manage the transaction.  Any tim...
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Rules of Thumb are for the Birds

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Rules of Thumb are for the birds October 11, 2015  by  Michael Shea PA   (Edit) In the world of small business sales and mergers and acquisitions every buyer thinks every business is overpriced and every seller thinks its worth more than what you tell them. Over the years “industry experts” of which I am apparently one, bandy about “rules of thumb”. In other words….business X sells at 2 x cash flow or 70% of sales etc etc etc. I recently had a broker call me up and tell me that a business was overpriced (not her job) and that the proper valuation method was a $ value per customer. Oddly enough a month prior she had a different position entirely (#notethesarcasm). Valuation is an art and there is data to support proper pricing. But in simplest terms there is not one method that is correct; however sellers need to be particularly cognizant of market dynamics like supply and demand and inventory levels. Yes even in small business sale and mergers when inventory...
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