Why Should You Buy an Established Business?
A pre-existing business is a proven commodity. A new business, regardless of how great your idea may be, will always have a future that is uncertain. You can hire many consultants and plan meticulously. Yet, even with the best ideas and most experienced consultants, your newly minted business could still quickly fail. A business with a long track record of success provides you with a degree of security and certainty.
It’s also important to note that an existing business has a myriad of established relationships, which are invaluable. Business is all about cultivating strong relationships and developing a positive reputation. An established business will have those relationships set up and ready to go. This can be tremendously beneficial and save you a lot of time and energy.
Whether it is suppliers, customers or key employees and management, this track record can help ensure your success. It will bring with it long-term customers, as well as an established and proven supply chain. Supply chain issues should not be overlooked as a key factor in successfully operating a business. Many new businesses find themselves in ruins over unforeseen supply chain issues. Opting for an established business can help safeguard against an array of potential disruptions.
Another advantage of buying a pre-existing successful business is that it will have a proven cash flow. Statistics¹ show that 82% of businesses fail due to cash flow mismanagement. Even with exceptional ideas, it can take years for a new business to take flight, but an established business should have positive cash flow from day one. No matter how well you plan, there is no way to know with certainty that your new business will generate the revenue you expect it to. An established business can provide proven cash flow, and that is so critical for the success of any business.
Finally, a business is only as strong as the idea and people behind it. An existing business will already have key people in place. You should look for one that has proven and reliable people.
Hiring from scratch is often much harder than it sounds. All too often a resume fails to tell the full story about a potential hire. When you opt for an established business, the previous owner has already vetted key team members for you and they have experience working in the industry and performing a certain role.
Again, new businesses fail way too often. Working with a business broker or M&A advisor and choosing to buy a proven and time-tested existing business will eliminate many headaches. This approach will dramatically boost your overall chances of success and provide you with peace of mind in the process.
Copyright: Business Brokerage Press, Inc.
¹ https://www.score.org/resource/blog-post/1-reason-small-businesses-fail-and-how-avoid-it
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How Business Owners Can Leverage AI
Artificial Intelligence has certainly received more than a bit of attention in the last two years. It’s no wonder that many business owners wonder how best to use this tool to gain an edge over the competition.
Currently, the cost of ChatGPT-4 is only $20 per month, which is a very nominal cost considering its capabilities. For that cost, users gain access to a powerful large language model or LLM. ChatGPT-4 allows users to put in a prompt and quickly receive an answer. Since ChatGPT-4 is a neural network, it is possible for you to customize how data is generated.
An AI Virtual Assistant?
Almost anyone can appreciate the benefits a virtual assistant can bring. With ChatGPT-4, it is possible to use the technology as a digital VA that can simulate the work you might otherwise need to hire people to do. AI tools have become better and better at providing pinpointed information. More and more, business owners are viewing artificial intelligence as a tool that can serve the function of a virtual assistant or in some cases even a trusted business advisor.
One example of how you could leverage ChatGPT-4 is to help you with your website’s SEO. Instead of hiring an expert, AI can assist you by generating lists of valuable keywords and SEO instructions.
Other ways business people have used ChatGPT include everything from customer services and support to employee training. Its functionality is incredibly versatile and can serve many niches.
Creating GPTs
GPT stands for “Generative Pre-Trained Transformer.” This term basically refers to a language model and framework used for artificial intelligence. This type of AI uses neural networks for tasks that involve language.
Through GPTs, people now have the ability to create assistants or bots. To date, over 20,000 GPTs have been created. These are highly specific programs that have the ability to use internal data in ways that users deem fit. The more refined the prompt you put in, the more precise the information that you will receive.
Another tool that could be helpful to business owners is Voice Chat GPT, which can transcribe what you are saying in real time. There is also Visual Chat GPT, which can verify visual information, for example, identifying the type of bird in a photograph.
Creating Personas
In order to get the most out of ChatGPT-4, you can prime it and tell it what you want and need. Through ChatGPT-4, it is possible to create “personas” to bounce ideas around and get different information and feedback. For example, it is possible to create CEO and marketing manager personas, to name just two. The information you receive will differ depending on the persona you turn on. Different information and responses will then be generated via these different personas. This tool allows you to ask and receive responses on a wide variety of business-related questions.
Protecting Information
One word of caution in using these tools is to be careful regarding importing confidential information into ChatGPT or other AI tools. While efforts may be made to keep information confidential, it is still possible that other companies will use this information for training purposes. Any sensitive information about your business, employees or customers should be carefully guarded.
The bottom line is yes, you can use AI to improve and expand your business, and you can start doing this right away. It’s important to note that artificial intelligence is a fast moving and evolving technology. For that reason, the way you can utilize it today may be entirely different in the coming years.
Copyright: Business Brokerage Press, Inc.
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Discovering How to Leverage SBA Lending Options
For most entrepreneurs, finding the money to launch their first business stands as a tremendous challenge. The good news is that getting a loan through the Small Business Association (SBA) is turning out to be a viable option for many business owners.
The SBA doesn’t directly provide loans itself, but instead, works to facilitate lending. SBA assistance can even extend into the realm of micro-lending. It is very important for prospective buyers to realize that since SBA loans are government backed, lenders are typically much more willing to offer a prospective buyer a loan. Impressively, the SBA will cover seventy-five percent of a lender’s loss in the event that a loan ultimately goes into default.
Many entrepreneurs find the issue of collateral to be a challenging one. Once again, the SBA can be of assistance. In some cases, an SBA loan may bypass the need for collateral altogether.
Overall, SBA loans do in fact have a good deal in common with other types of loans. Prospective buyers should have all of their financial documentation ready and well organized. In short, prospective buyers should have all their information organized as they would when dealing with a bank without SBA involvement.
Not every prospective buyer will qualify, so the first step that should be taken is for a would-be business owner to check and verify that they do indeed qualify for a loan. The next step for a prospective buyer is to find a lender and complete all necessary SBA forms.
There are several factors that determine eligibility for an SBA loan. Here are the two top factors that are important for qualifying for a loan
- The business must be based in the United States, the business must be a for-profit venture.
- Prospective buyers should expect that their application will take two to three months to process once it has been submitted.
All too often, people assume that they simply won’t qualify for an SBA loan. The statistical data tells a different story. Every year, thousands of people are approved for SBA loans. It’s important to keep in mind that these loans are not just for those looking to buy a business. The SBA also helps existing businesses that are looking to expand.
For the end of 2023, the SBA Administrator Isabel Casillas Guzman announced that this year, the SBA delivered $50 billion and this included capital, disaster relief and small business support. Guzman stated, “The Biden-Harris Administration remains committed to simplifying and addressing persistent inequities in accessing capital to ensure all small business owners can get the funding needed to grow and create jobs for our economy. In Fiscal Year 2023, the SBA transformed its lending and investment programs and expanded its capital partners to deliver nearly $50 billion in startup, growth, and recovery capital, as well as surety bonds, including more small business lending to people of color, women, and veterans.” [1]
Business brokers and M&A advisors are experts in working with the SBA. Entrepreneurs looking to buy a business can benefit enormously from their years of SBA experience. Working with a business broker or M&A advisor can help you streamline the SBA process and dramatically increase your chances of success.
[1] https://finance.yahoo.com/news/sba-announces-biden-harris-administration-154000629.html
Copyright: Business Brokerage Press, Inc.
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Key Steps for All First Time Buyers
Are you a first-time business buyer? If so, it is critical that you work with a business broker or M&A advisor. If you’ve never purchased a business before, you simply can’t anticipate all that is involved in buying a business.
Buying a business is vastly different than buying a home, which is typically the largest purchase that most first-time business buyers have made. Sometimes buyers assume that since they have made large investments before, they will have a leg up in the business buying process. However, they typically quickly find out that they still need a great deal of assistance to navigate the complexities of the business buying process.
Business brokerage professionals know the process, the lay of the land, and the players involved. Additionally, business brokers and M&A advisors know where the traps and pitfalls are located. When it comes time to buy a business, all prospective business buyers can benefit from a guide.
Let’s take a closer look at some of the steps that are involved in purchasing a business.
Sign a Confidentiality Agreement
Prospective business buyers should always be ready to sign a confidentiality agreement. It is important to put yourself in the shoes of the seller. They have invested a great deal of their lives in their business and allowing someone to peak behind the curtain can be a stressful prospect. Signing a confidentiality agreement is an initial sign of good faith.
Investigate the Business
Next, you’ll want to gather a good deal of information about the business. Once more, working with a business broker or M&A advisor is a prudent move as business brokers understand what kind of information should be acquired. They have an understanding of how to uncover important information that might otherwise go unseen.
Armed with as much relevant information as possible and an experienced brokerage professional, you’ll want to carefully evaluate the business in question. With the right information and experienced professionals at your side, you can be sure that you are making a wise investment.
Make Your Decision
The next step is to either decide to make an offer or pass on the business. You and your business brokerage professional will carefully evaluate a range of information including financial statements and tax returns. When choosing to make an offer, it is important that all key details are clearly laid out in writing, and this includes contingencies.
Finding the right business for you, in part, means determining what kind of business you truly want to own. The good news is that business brokers and M&A advisors are experts in every point examined in this article, and they can even assist prospective business buyers with determining what type of business is a good fit. The sooner you begin charting out a plan, the greater your chances of finding the right business for your unique needs, preferences, and specifications.
Copyright: Business Brokerage Press, Inc.
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Four Questions to Ask Yourself Before Purchasing a Business
Truly understanding a business is much like understanding the condition of a car. It is necessary for a skilled mechanic to “pop the hood” to access the true condition of a car. In much the same way, you and your team of experts need to “pop the hood” of the business in order to understand the business’s long-term health and viability. Here are four things to consider before signing on the dotted line.
Will You Enjoy the Work?
Owning a business, especially if you are planning on being an owner-operator, can be a demanding path. You will likely have to log many hours, especially in the beginning. For this reason, you’ll want to select a business that you will enjoy owning.
Life is too short to own a business that you would not want to be involved in. Importantly, if you do not like the business you own, the odds of facing burnout and losing interest are higher. It goes without saying that these kinds of obstacles can dramatically harm your business. Think long and hard before selecting a business to buy, as it is a decision that you will have to live with for years to come.
Did You Examine the Business Plan?
A second factor to consider is that there is no replacement for a good business plan. When you are considering buying a business, you’ll want to dive in and understand every aspect of the current owner’s business plan. If the business plan has major holes or just doesn’t seem to be adding up, you should move on.
Do You Understand the Financials?
Similar to understanding the particulars of a business’s business plan, it is also critical that you have a very precise and clear view of a business’s financials. You should look over everything from profit and loss statements to tax returns and more. It is a smart idea to consult your accountant and a brokerage professional regarding what financial documents you should review. Before you buy a business is the time to understand every small detail of a business’s financial health, not after.
How is the Business Performing?
A fourth factor to consider when evaluating a business is the business’s overall performance. It is possible for a business to have a good business plan (at least on paper) and strong financials and yet it could still have a less than stellar future. Oftentimes, the true health of a business lies beyond the business plan and the current financials.
You’ll need to know about a wide variety of factors including how vulnerable the business is to competition, changes in market forces, the status of key management and employees, the relationship with key suppliers and customers, and any pending litigation. When buying a business, you simply can’t afford to overlook any area.
If you keep an eye on these four key areas, and work closely with experienced professionals like business brokers or M&A advisors, your odds of finding the right business for you will skyrocket. Owning a business that you love will greatly increase your chances of success, so don’t underestimate the emotional factor in the equation.
Copyright: Business Brokerage Press, Inc.
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