Buyers Questions .
Question: I
am interested in purchasing a business, how long should I expect the process
to take?
Answer: There
are many factors in this process; generally speaking it can take 60 to
90 days. Some of the key factors to consider are as follows:
Licensing: Many businesses require various
licenses such as a food and beverage license, business license, or a
liquor license, all of these license procedures have various processes
and time required can vary.
Financing: Loan approval can take some
time; the lender has various buyer evaluations based on a credit check,
asset verifications, viability of the business, evaluation of personal
retail experience and other various risk assessments.
Lease: The
landlord must evaluate the new potential business owner, and forge arrangements
with the new buyer.
Question: How much capitol
do I need down?
Answer: The amount
of capitol down to enter an agreement varies on the size of the business.
Some determining factors include:
Real Estate: Does the business opportunity include real
estate in the transaction, believe it or not this can actually lower
the capitol needed down on the business opportunity.
Profitability: Profitability combined with current business
assets and inventory is really the most influential factors in determining
the amount of capitol needed down in the purchase process. An easy way
to determine this is to figure out what the total monthly sales are for
any given business and then figure out what the total inventory is for
the given business. Of course it varies from industry to industry and
size and scale of business, but this is a good rule. Our firm sells a
lot of liquor stores, they have a great profit margin, an example would
be a liquor store that sells say 100,000.00 a month and has 100,000.00
in inventory. You add those two numbers together and get 200,000.00,
take the 200,000.00 and multiply it by 4 to 5 times the amount. In this
example you could expect to pay 450,000.00 to 550,000.00. You need 25
to 35% of this number down in this example.
Question: What should I expect
to pay for a business?
Answer: This depends
on a lot of things, size, and profitability. Again, the easiest way to
determine the value or cost of a business is to add the monthly sales
gross and the currently value of the inventory, then take this figure
and multiply it by 4 or 5 times the value for a ball park figure.
