casterberry
New member
@christopherc I bought a biz 3 months ago. The owner asked for 2 times what it was worth. It may be a good idea to get your own broker to guide you, give you an honest opinion/insight, etc.
I’d like to buy a business I helped build but can’t afford
- Thread starter christopherc
- Start date
-
- Tags
- business help small business
christopherc
New member
@casterberry Thanks, appreciate the guidance!
casterberry
New member
@christopherc I hope it's useful. If it's retail, do an inventory. Make sure the fixtures and furniture are in good shape, take the printer for a spin...there are so many things that go into this. Brokers can help you find financing too.
@christopherc Dear Business owner,
I understand that your business may be for sale. I have grown fond of this business since I was working with you early on in the development. If you are selling, I'd like to speak with you regarding options you would consider for me buy in or purchase outright. Thank you.
I understand that your business may be for sale. I have grown fond of this business since I was working with you early on in the development. If you are selling, I'd like to speak with you regarding options you would consider for me buy in or purchase outright. Thank you.
lifebyfire88
New member
@matteoiv Clean that up a little. Instead of "I was working with you" try "I have a fondness for this business due to my time working with you early in development.". The word "was" should very rarely be used in clean and elegant writing (comes across as low brow: think how "wuz" is typically used in memes).
@lifebyfire88 Good points. Cheers.
christopherc
New member
@christopherc You're welcome. It all starts with a conversation. 
good luck.
good luck.@christopherc Absolutely there are ways to finance it, but understand what you would be giving up in each instance. An investor means giving up control, a bank means giving up cash flow.
But neither are a viable option until you’ve learned a lot more the price, financials, etc. the worse thing you could do is approach any source of capital with no details.
But neither are a viable option until you’ve learned a lot more the price, financials, etc. the worse thing you could do is approach any source of capital with no details.
firsthandsemiuniversalist
New member
@christopherc I think you could find financing for the down payment from silent investors, but you’ll have to be willing to give up equity. If the down payment is $100k and you can only come up with $20k expect that you’ll only receive 20% of the business.
Seller financing would be your ideal route, but that’s usually reserved for an owner who is selling to a family member or a very trusted group of employees that have been with them for years.
Seller financing would be your ideal route, but that’s usually reserved for an owner who is selling to a family member or a very trusted group of employees that have been with them for years.
@christopherc Speak to the owner about wanting to buy the business first and foremost. Considering you helped start it up- you have some rapport there. I’d be doing that before even considering anything else. What the owner responds will dictate your next steps.
@christopherc First thing's first, revenue is somewhat meaningless in this context. Cash flow would be the main thing to look at if you're going to be financing it in any way.
If you're in the US, this is what SBA 7a loans are for.
You could work out a structure where you finance 75% through a 10 year loan (up to $5m) with the 7a program, 15% through a seller note and 10% (the SBA mandated minimum) through equity.
If you're savvy enough, you could even make it so you don't have to pay for the equity injection by offering an equity step up to an external investor (they pay for x% but get more than x%) or by getting the seller to issue a full standby note. As long as the other parties are willing, you could technically acquire the business for 0 down.
It goes without saying that you need to offer a personal guarantee to do this and risk bankruptcy if the business fails.
If you're in the US, this is what SBA 7a loans are for.
You could work out a structure where you finance 75% through a 10 year loan (up to $5m) with the 7a program, 15% through a seller note and 10% (the SBA mandated minimum) through equity.
If you're savvy enough, you could even make it so you don't have to pay for the equity injection by offering an equity step up to an external investor (they pay for x% but get more than x%) or by getting the seller to issue a full standby note. As long as the other parties are willing, you could technically acquire the business for 0 down.
It goes without saying that you need to offer a personal guarantee to do this and risk bankruptcy if the business fails.
@christopherc Based on what you said, I would approach the owner(s) with a strategy into how you plan on doing it and ask you to cut you in and bring you as full management owner with some kinda of structure where you get shares as time/performance happens.
faith20175
New member
@christopherc Ask for a small vendor take back - get the rest financed. Hopefully the business has asset coverage
@christopherc You can always offer to buy with seller financing, lots of owners will accept a good offer with seller financing too so long as they trust that you aren't going to run the business into the ground, getting the money over 3-5 years is little different than getting it all up front, and being able to reclaim a business they know has value if you stop paying will be enough for many.
Best thing you can do is approach them and talk it out, if your on good terms, they are likely to even be pretty fair with you... worst case scenario you get a no... even if they say no, they might tell you what they are looking for and you can figure out a way to get there...
I'd also say two things... you need some one to look at their books... 3 million revenue does not mean 3 million profits... they might only be 100k net revenue.. Depending on the value you may be able to talk to the SBA about getting a loan for up to 90% of the purchase price, and you may be able to find VC money as well as alternative options...
Best thing you can do is approach them and talk it out, if your on good terms, they are likely to even be pretty fair with you... worst case scenario you get a no... even if they say no, they might tell you what they are looking for and you can figure out a way to get there...
I'd also say two things... you need some one to look at their books... 3 million revenue does not mean 3 million profits... they might only be 100k net revenue.. Depending on the value you may be able to talk to the SBA about getting a loan for up to 90% of the purchase price, and you may be able to find VC money as well as alternative options...
christopherc
New member
@christopherc I would try to get a bit creative.
Incentive him with payments.
If the business makes 1M profit a year, offer him $1M a year for x number of years. It's on you to grow the business beyond that 1M a year for your own salary.
If you fail to pay the amount as agreed, he gets the business back and can go find a new buyer.
Incentive him with payments.
If the business makes 1M profit a year, offer him $1M a year for x number of years. It's on you to grow the business beyond that 1M a year for your own salary.
If you fail to pay the amount as agreed, he gets the business back and can go find a new buyer.
casterberry
New member
friendlyatheist37
New member
@christopherc So, you were an employee at a company? And you now want to buy said company years later? And you’re calling the person who founded the company and built it into something you want to buy (but can’t), someone who’s “into shiny things”?
You’re clueless, and sound jealous. The attitude you have is so far away from the mindset of a real entrepreneur. It sounds like the person who built the business did exactly what a business owner is supposed to do. Hire people who are good at things, scale the business, have an exit strategy.
Employees always think they can do it better.
You don’t have to buy this business. If you’re so convinced of your ability, build a competing one.
You’re clueless, and sound jealous. The attitude you have is so far away from the mindset of a real entrepreneur. It sounds like the person who built the business did exactly what a business owner is supposed to do. Hire people who are good at things, scale the business, have an exit strategy.
Employees always think they can do it better.
You don’t have to buy this business. If you’re so convinced of your ability, build a competing one.
christopherc
New member
@friendlyatheist37 Sorry if my comments came off that way. The current business owner is one of my greatest mentors and I have immense respect for him. A better explanation would have been that he tends to build, scale, and exit quickly. That’s been his way for decades.