Buying a Business

BigBody79

BigBody79

Well-Known Member
Joined
Mar 30, 2005
Location
Lumberton
I am looking to buy a business.

The foundation is already laid and this plan is a pretty good one. It has been successful and growing for the last few years.

It is my father-in-laws business. I know that he is going to want to retire in the next 4-6 years. He wants to sell the business to make up for any short comings on his retirement. I would much rather buy the business from him so that if I am not a good business owner he has the money and can retire comfortable, and hopefully I would have time to recover before it is time for me to retire. I would rather not just take over the business where he is getting a 'retirement check' from the business every month.

It is a two man operation. It is just him and a guy that helps him part time.

Basically the question is what should I be doing now to ready myself for the purchase of this business?

Is there anything that I can do that will make me more attractive to banks that are loaning money?

Has anybody bought a business before?

Not really looking into getting into the value and price aspects right now. Just wanting to figure out what I need to do to put myself in the situation to purchase. But for the sake of argurment it is less than 350K
 
Look into the NC Rural Centers microenterprise loan program, they are catered to small business' and are supposedly much more lenient than the banks with their loans. Also there is alot of good info at www.sba.gov, i think rhey will also help small business with funding....if your interested shoot me a pm as i have a list of 6 organazations thqt help with small business funding.
 
And you need to take the books from the last 5 years with you. I'll sell you my business for 250k and I made well over that last year, I promise.
 
General rule for value is 5 years of profit plus assets. This generally applies more to stores than a two man travel service.
 
What does he do?

Reason I ask.... is the asset your FIL? If he is the business, then you have a lot of learning and growing to do. If he has others that do all the work and he manages it, then its a lot easier.

Be careful of buying a business where the previous owner is the asset and the business. You may get in over your head... And, the value of the business isn't nearly as much as thought as the only vauable asset will be leaving.
 
Sells and services fire extinguishers and also does hydrotesting on air cylinders.

I think that he is a part of why the business does well. I think that he does a good job of people relations. But I don't know if he is major asset. It isn't as if the the business relys on him to create and do unique things.

You do bring up a valuable point.

But this is going away of what I am really asking.

What am I going to be required to have to be in the situation to buy the business.
example:
Will I need 20% cash on hand?
Will I need collateral equalling 20%? What collateral would be sufficient?
Will I need previous business experience?
 
Don't over pay for it just because he's your FIL. I know a couple fire extinguisher co. owners and basically all you will be buying is his contracts he has aquired. I know some co. will just renew automatically but some take bids on this type of contract every couple years. If your in the position to just start a new co. let him put his co. on the market and sell it to someone else then start your own co. w/ his advice and supplier connections and just under bid his old company. You could win the bids since you wouldn't have a large loan to pay. yeah you won't have the "big" income from the start if you were to apuire his contracts but at the same time you wouldn't have the "big" liability of the loan if he's wanting something crazy like 300k. But we don't know the size of business either.
 
I agree the price is way out of line, but to answer the question you need 20% cash to get a normal business loan. Also the bank will have to agree that the business it worth the price.
 
I will be honest with you there hasn't been any real numbers discussed. I was just throwing numbers out there. I think that we are reading way into the numbers and less into the theory. Obviously I wouldn't be able to get a loan for something that is way out of line. If the biz is only worth 125K then that is all that the bank will loan. Just like buying a house they are not going to give you twice the money to buy the house. That would be bad biz. on the banks part.
 
But it seems as if I am going to need to be able to show the bank that I have the 20% on the front side. The lot that his shop is on is beside his house then on the other side is our lot and on the other side of me is another lot where I would want to put the business. I am thinking right now that if I go ahead and buy that lot. Whether or not I buy the business I will have some real assets that I would be able to put for collateral and not have to worry about putting up my residence or other personal property. (He also owns that lot, maybe I can get that cheap.)

Just for those doing the math I'll save you the time. He owns the land on all three sides of us. Really it doesn't sound that great to be living next to my MIL/FIL but is really is nice.
 
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