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Started By
Message
$7 trillion of Baby Boomer businesses will be sold by 2030: Here's a guide to buying one
Posted on 11/27/22 at 11:21 pm
Posted on 11/27/22 at 11:21 pm
quote:
A quick and dirty guide to buying one:
1 - The basics: reading
You're going to need to do some reading.
Not a lot, but you'll need to get familiar with the fundamentals of the process.
The most popular books are:
• HBR Guide to Buying a Small Business
• Buy Then Build
• Buying a Small Business for Dummies
2 - The basics: learn to analyze businesses
You'll want to learn to analyze deals like the pros.
The absolute best place to do that? The podcasts.
The best podcasts for learning to evaluate deals:
@acquanon
@AcquiringMinds_
3 - Get SBA financing lined up
The SBA 7(a) allows 90% financing up to $5 million.
Reach out to folks like
@sbabmarks,
@LisaGForrest,
@SBA_Ray,
@SBALenderLyons and
@SBA_Matthias to find out your SBA options.
4 - Or, find investors
Perhaps you prefer equity partners vs SBA debt or both?
Folks like
@steveressler,
@tsludwig,
@Sam_Rosati are ready to invest in good deals.
Ask
@MikeBotkin_ how he found an investor via
@SamtLeslie's newsletter.
Lot of $$ is out there!
5 - Find a business you like
Time to find a business you'd want to run.
Two options: on or off market
For on-market deals, check out these sites:
@BizBuySell
@microacquire(@agazdecki)
@buyandsellabiz
6 - Off-market deals
The methods of finding an off-market business for sale are as limitless as your imagination.
The obvious methods:
- Local networking
- Cold outreach
Follow @J_M_Vogt and @Sam_Rosati (two veteran business buyers) for info on how they do it!
7 - If listed, discuss the business with the broker
Brokers like @GoodsCapital, @Socalbusinessb1, @ClintFiore, @PlaybookAdvisor represent sellers but will help guide you through the buying process.
Ask them tough questions about the business!
8 - Pick a price
Most small businesses are worth 2 to 5 times earnings.
This typically means EBITDA but for small deals it's seller's discretionary earnings (SDE).
Find the typical valuations for your target industry. They vary!
Follow @Capital4Value for valuation info.
9 - Submit an offer
Offers are typically made in a letter of intent or "LOI"
The LOI will cover the big-picture terms including your price.
Your lawyer can help you prepare this!
10 - Conduct due diligence
Assuming your offer is accepted, it's time to lift the hood.
You're looking for issues with the business and legal risks.
Folks like @ElliottEHolland of Guardian Due Diligence,
@RomanSB1 of DueDilio and your lawyer can help!
11 - Sign and close!
If the business makes it through due diligence, you'll enter into a purchase agreement (with the help of your lawyer) and eventually close the transaction.
Champagne time!
12 - You're a CEO now what?
The real work begins!
Follow folks like @SamtLeslie, @joshuamschultz, @RegZeller, @WilsonCompanies, @StrongpointRich, @BillDA, @SullyBusiness, @royceard, @thegeneralmills, @girdley for a glimpse into life as an operator.
LINK
Could something like this really work? As I get older and have more disposable income, I want to try to get a secondary income stream going.
Is owing a small business a hassle? What are some examples of such businesses? Do you need to live physically in the same city as the business to make it work? Can you promote someone from within the organization/company you are buying to run it day-to-day, with you in a more advisory / supervisory role? Are most folks better off owning real estate and getting rental income for income diversification, than trying their hand at something like this?
Assume for the purposes of this discussion that - 1) my wife and I have a steady income stream from our 9-5 tech jobs and we have no plans to quit those jobs for at least the next 10-15 years as the financial security that comes from that is just too big for our family, 2) we invest in the stock market (DCA/passive index funds mostly), 3) we maximize our 401(k)s, IRAs every year, and 4) we have a 6-month expense stacked away in savings.
This post was edited on 11/28/22 at 9:40 am
5
Posted on 11/28/22 at 7:35 am to rickgrimes
Yes, I've been on both sides of the table.
A lot of your questions get answered in diligence (physical presence, ops, personnell, etc.). The first company I bought was 10% down, owner financed 40%, SBA the last 50%. Better deal than most as it helped get the owner paid and out the door (which is what he wanted).
Based on your premise you'd need to find an established B2C business that has about 40-70k in cash flow. Majority of those businesses don't require daily presence rather a weekly review. These would be small store fronts, ice cream shops, etc. You couldn't buy say an HVAC/Plumbing or Disaster rehab business that requires daily interaction.
I browse bizbuysell frequently. Looking for new businesses in our industry to acquire for market share. I also browse the areas we want to retire in to get a lay of the land and to see what kind of businesses are turning over. I wouldn't normally recommend this but call a local broker or a broker in the area you're interested in. Sign an NDA and they will start sending you all sorts of deals that aren't on market too.
A lot of your questions get answered in diligence (physical presence, ops, personnell, etc.). The first company I bought was 10% down, owner financed 40%, SBA the last 50%. Better deal than most as it helped get the owner paid and out the door (which is what he wanted).
Based on your premise you'd need to find an established B2C business that has about 40-70k in cash flow. Majority of those businesses don't require daily presence rather a weekly review. These would be small store fronts, ice cream shops, etc. You couldn't buy say an HVAC/Plumbing or Disaster rehab business that requires daily interaction.
I browse bizbuysell frequently. Looking for new businesses in our industry to acquire for market share. I also browse the areas we want to retire in to get a lay of the land and to see what kind of businesses are turning over. I wouldn't normally recommend this but call a local broker or a broker in the area you're interested in. Sign an NDA and they will start sending you all sorts of deals that aren't on market too.
Posted on 11/28/22 at 8:36 am to rickgrimes
The boomers would rather ruin it on purpose before letting a millenial have it just like they did with the earth
Posted on 11/28/22 at 10:32 am to rickgrimes
I am in this stat as the buyer, currently negotiating with the owner but need to finish the year to optimize SBA lending. 50% down via SBA loan, owner finance the remaining 50%. Will need to get creative for the 10% match from SBA, but my banker thinks I have the assets/resources to meet that burden. I have been with the company for 8 years and ran it for the last 2 years (owner retired)
For me I would need to know the business/industry to make an investment and not be part of the day-to-day. Promoting from within would sound like the ideal option for your situation; but you need the right people and to be able to know you aren't being fed BS.
quote:
Is owing a small business a hassle? What are some examples of such businesses? Do you need to live physically in the same city as the business to make it work? Can you promote someone from within the organization/company you are buying to run it day-to-day, with you in a more advisory / supervisory role? Are most folks better off owning real estate and getting rental income for income diversification, than trying their hand at something like this?
For me I would need to know the business/industry to make an investment and not be part of the day-to-day. Promoting from within would sound like the ideal option for your situation; but you need the right people and to be able to know you aren't being fed BS.
Posted on 11/28/22 at 12:35 pm to rickgrimes
The small business we've been waiting to buy is making us wait longer. The stock market tanking has the owner uncertain she can retire. Oh well....
Posted on 11/28/22 at 1:29 pm to Rendevoustavern
quote:
I browse bizbuysell frequently. Looking for new businesses in our industry to acquire for market share. I also browse the areas we want to retire in to get a lay of the land and to see what kind of businesses are turning over. I wouldn't normally recommend this but call a local broker or a broker in the area you're interested in. Sign an NDA and they will start sending you all sorts of deals that aren't on market too.
Thanks for the inputs!
The more I look into this, the more the micro-SaaS businesses (<$10K MRR) intrigue me. You could buy a business for as little as $10K and keep it running if you know a little bit of coding (my wife is a software developer, so that helps). A SaaS company would certainly not have the overheard of people and machines and buildings like let's say a roofing company, or doggy daycare or HVAC business like you mentioned above.
This guy who owns 4 micro-Saas businesses tells you how to go about buying your first such business in this blog post: Your First Acquisition
Here's the same guy, Andrew Pierno, talking about how those business are doing thus far (fast forward to the 1:02 mark): Acquiring Minds podcsst
This post was edited on 11/28/22 at 1:32 pm
Posted on 11/29/22 at 8:55 am to el Gaucho
quote:So hip yet so edgy of an opinion.
The boomers would rather ruin it on purpose before letting a millenial have it just like they did with the earth
Posted on 11/30/22 at 3:52 pm to Rendevoustavern
So coming to the table with a lot of ignorance but how do buyers get financing to purchase businesses without any prior experience within this space? So if I wanted to buy a daycare center would the lender require me to have experience in this space?
Or is it enough to review ongoing financials, valuation, and credit/collateral evaluation of the buyer? Seems like the surface level research reaches a dead end pretty quickly.
Or is it enough to review ongoing financials, valuation, and credit/collateral evaluation of the buyer? Seems like the surface level research reaches a dead end pretty quickly.
Posted on 11/30/22 at 4:05 pm to GatorH8r
quote:
So if I wanted to buy a daycare center
Might wanna put it in your wife’s name baw
Posted on 11/30/22 at 5:17 pm to el Gaucho
Yes of course. Just using as a hypothetical
Posted on 11/30/22 at 9:00 pm to rickgrimes
quote:
2030
We will own nothing and like it by then.
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