How to buy a business?

[v***@yahoo.com]

Where does one look for businesses for sale? I have a strong technical
background so am not looking for retail, but something in manufacturing
or computers. I am just curious where does one typically see these
advertised? Here is my ideal scenario and tell me what is wrong:

Owner has a profitable business for sale but is moving on to more
profitable endeavours so wants to sell. He would be willing to mentor
the new owner for a year at no charge. After a year he would sell it to
you and bill you his time as a consulant would.

Is that how it typically works? I cant imagine buying a business
without some period of free mentoring, no?

[John A. Weeks III]

Post by v***@yahoo.com
Where does one look for businesses for sale? I have a strong technical
background so am not looking for retail, but something in manufacturing
or computers. I am just curious where does one typically see these
Owner has a profitable business for sale but is moving on to more
profitable endeavours so wants to sell. He would be willing to mentor
the new owner for a year at no charge. After a year he would sell it to
you and bill you his time as a consulant would.

Very seldom does anyone sell a profitable business. Rather, they
would hire a manger, and run it like an ATM or cash machine. If
you had a business that ran by itself, and dumped money into your
checking account each month, would put an end

Post by v***@yahoo.com
Is that how it typically works? I cant imagine buying a business
without some period of free mentoring, no?

No. Most often, the business is in trouble, and the owner
wants out. The new owner has to find a way to turn around the
business, and pay off the loans to the former owner.

The biggest problem with buying a business is the price. A
sound profitable business is going to be very expensive because
you have to pay up front for some fraction of the sum total of
the future earnings. Even a small business can be priced high
if there is real estate, inventory, equipment, or a franchise
involved. What you want to avoid is buying a job. You can get
a job anywhere. With a business, you need to earn a reasonable
rate of return in addition to your salary.

-john-

[NC]

Post by v***@yahoo.com
Where does one look for businesses for sale?

One does not look for businesses for sale, one goes out and finds
profitable businesses that are not for sale and convinces the owner to
sell. Your best bet is finding a profitable company founded at least
15 years ago by an individual who is currently over 55 years of age.
Typically, such an owner is successful, but burned out and grossly
underdiversified. Your purchase offer allows him to walk away with a
large lump sum, dump it into mutual funds and proceed to enjoying a
well-earned retirement.

Post by v***@yahoo.com
I have a strong technical background so am not
looking for retail, but something in manufacturing
or computers.

Manufacturing, maybe. Computers? I doubt it; the industry is not
nearly old enough.

Post by v***@yahoo.com
I am just curious where does one typically see these
advertised?

You don't. Get a copy of a book by Lionel Haines titled "How to Buy a
Good Business with Little or None of Your Own Money"; it's been out of
print for a while, so you'll have to search through used book dealers.
There are some useful tips in it.
In a word, everything.

Post by v***@yahoo.com
Owner has a profitable business for sale but is moving
on to more profitable endeavours so wants to sell.

Nope. The owner (over 55 years of age) has a profitable business,
which he has been running for at least 15 years. The money is good,
but health issues are beginning to show, and the energy level is not
what it used to be. Additionally, the business represents the bulk of
his net worth; should something happen to it, consequences to lifestyle
in retirement would be serious. Speaking of retirement, the man had
thought about it (probably repeatedly), but not seriously enough to
make any inquiries. This is where you come in with a proposal that
cures every worry at once...

Post by v***@yahoo.com
He would be willing to mentor the new owner for a year
at no charge.

Not gonna happen. You could come and work for the man before you buy
him out (although it rarely happens in practice), but after you buy him
out, he's out the door for good. Otherwise, there will be people in
the business who are working for the old man, even though you pay their
wages.

Post by v***@yahoo.com
After a year he would sell it to you and bill you his
time as a consulant would.

After a year, he is playing golf somewhere in the Sun Belt, living in a
brand-new retirement community... You'll be lucky if he returns your
phone calls...

Cheers,
NC

[v***@yahoo.com]

Post by NC
You don't. Get a copy of a book by Lionel Haines titled "How to Buy a
Good Business with Little or None of Your Own Money"; it's been out of
print for a while, so you'll have to search through used book dealers.
There are some useful tips in it.

THanks for the tips. i have just ordered this from amazon ( got it for
$1.50 ! ). Ill read it and post any questions about it here later.

[NC]

Post by John A. Weeks III
Very seldom does anyone sell a profitable business.
Rather, they would hire a manger, and run it like an
ATM or cash machine.

Depends on the numbers... If you have a business that
consistently nets over $200,000 a year, you are definitely
right. Problems begin when numbers scale down. Say,
you have a business that in the last five years netted you
$100,000 on average, with the low being $50,000 and high,
$150,000. You figure, a decent manager will cost you
$60,000 a year, so if the future repeats the past, you are
looking for an average annual income of $40,000 with a
possibility of making a $10,000 loss. And this is assuming
your manager does not steal...

Also, successful business owners often retain financial
planners. And a good financial planner will definitely point
out that the business represents an undue portfolio
concentration for the client. Poiting out will intensify as
the client grows older...

Post by John A. Weeks III
Most often, the business is in trouble, and the owner
wants out.

That's why businesses need to be bought BEFORE the
owner wants out...

Cheers,
NC