Buying Existing Businesses?

Question

In Brandon Turner's The Book on Rental Property Investing he mentions the ability to buy existing businesses and view their statistics like Gross/Net margins. He mentions using a business broker and the ability to give a downpayment much like a rental property, but I was wondering if there was a good website view things of this nature. I love the idea as someone who is already in the world of business. Is a website my best bet? A business broker? both? I am curious to see if anyone has done this and the pros/cons that come with this idea. I have not done this before so I suppose I am starting out in this field.

Adrian Chu · Answer

Part of buying a business or investing in anything for that matter is having in depth knowledge in that area, or at least a passion in that area so that it's fun to learn about it. Are there any industries you have experience with or any you have a strong desire to learn more about? Do what fascinates you!

Adam Lendi · Answer

@Brendan Viehman One of my hats is as a business coach. I can safely say that, unfortunately, many business owners undervalue their businesses. If you get someone who is not savvy, they may see a lot less value in their business than it really has.A great example of this is my own parents. My dad has owned a limousine company for 25 years and he doesn't think his company is worth anything, because the cars are all used and he doesn't see a value in his book of business. fortunately, I'm working with them right now to build their business to sell for a lot more than they thought it was worth. Sadly many business owners start running their business down into the ground when they are ready to get out.There are opportunities abound, however, you need to do your diligence and make sure that the busisnesses as good as it looks. You really want to be knowledgeable about the industry you're getting into, so that when you are looking at the P&L, you know that all of the expenses are accounted for. IMO, I would pick a niche or an industry and focus on becoming an expert in that area, as opposed to looking at this as a generalist. You are far less likely to walk into a mess you don't understand.

Adam Lendi · Answer

@Brendan Viehman, do you have an idea of the sort of business you are looking to buy? Sometimes the best way to start this conversation would be to go straight to the owners of the businesses you are interested in purchasing.If you get in front of a business owner and they do want to sell, this could be a great time too bring in that broker or an attorney, if you aren't sure what you are doing. Otherwise, just like the rental property you mentioned, you're just doing your due diligence on the business to ensure the books make sense.In commercial real estate, especially where the business is dependent upon the real estate, such as apartments, mobile home parks, and RV parks, you really are buying a business. The due diligence is heavily centered around the books and the operation, more than the land and improvements. I think this is an exciting asset class and I am in the RV park sector. Happy to chat with you more.

Dave Hurrford · Answer

I agree, I also don't prefer the restaurant industry. Choosing to buy an existing business is a big decision that has an impact your life, and With the right connection you can find a business that's a good match, suited to your skills.

Brendan Viehman · Answer

@Adrian Chu Yes. Ideally not in the restaurant industry. Something more along the lines of marketing, sales, tech, gas stations, real estate, firms, or even lawn/pool care. My main hesitation is that I do not want something in the retail or restaurant industries.

Brendan Viehman · Answer

@Adam Lendi I have no specific business in mind, but I am curious at looking at a large variety of businesses income information. EX: See if businesses are listed for 100k, they are grossing 200k and netting 120k. An ideal situation is someone who wants to get rid of their business maybe because they are retiring moving or some other reason where you can get a good deal on it. A lot of the time I can view businesses for sale but I can't see any of their stats to know if they are even worth thinking about purchasing.I guess I am looking to see if anyone has done this or maybe any sites or strategies that could be useful in this kind of endeavor. I know it's not talked about much but I really like the concept.