Minnesota Business Brokers

Is Now The Right Time To Buy A Business?

The current economic downturn creates many changes, and also opportunity for companies, business buyers, and investors. 

Businesses which had been very profitable in the past, may be seeing their margin shrink or loss of profitability.  Other competitive companies may become available for a "rollup" of companies which allows; more efficiency, cost reductions, more diversity of product, and profitability.  Companies wishing to buy or sell a business may find more opportunity at a time when values (acquisition prices) are low.

Investors that have traditionally been in the stock market, or real estate, are looking at acquisition of companies as a good alternative investment during this time.  There may also be tax incentives under the "Stimulus Package" to invest in businesses and hold for a five year period.

Rollups are also favored for buyers and investors, because of the potential for efficiencies, cost reduction and increased market share and profitability.

Now is also a great time to buy for smaller investors.  Why?  Sellers are more eager than ever to sell their businesses and are pricing their profitable businesses to attract Buyers.  For Business owners the time is right with so many Buyers now and many more coming, looking for opportunities.  Sellers are positioned now more than ever to consider Seller financing as a means to help the Buyer make the purchase without having to seek outside bank financing which remains difficult.  However, Buyers must be prepared for down payments, in the range of 30% to 40%, for Sellers to become comfortable that the Buyer has a significant stake in the transaction and will not “walk away” from such a large down payment.  A savvy Buyer will often hire the former Seller back to consult for a period of time, to not only ensure the Buyer’s success but to involve the Seller in doing what they can to protect the Buyer’s investment.

Why Do Buyers Buy A Business?

The reasons are many and may involve leaving a good job with an accrual of significant job related resources after a successful career.  With numerous company’s “downsizing” and laying off people that event in someone’s life is often enough to get them to consider buying a business.  They may be looking for a new challenge, a change in their lifestyle, more income and most often,becoming their own boss and in control of their own destiny. 

Sometimes, a change in the Seller’s personal life or family will trigger a sale of even the most profitable business.  Of increasing interest is a Buyer’s desire for a higher return on their invested dollars than they have gotten from investing in real estate, stocks, bonds and especially in IRA’s and 401k’s. 

Lastly, as “baby boomers” approach retirement with the thought that they don’t really want to stop working, buying a business is the ideal way to keep working as much or as little as one wants and the income can provide for a better retirement.

Should A Buyer Buy A Business Instead Of Starting One?

An existing business has a verifiable track record versus the “start up” has a plan for future success.  Existing businesses have a customer base from which cash flow will be generated from the very beginning.  Of increasing importance is the ability of the Seller to stay and train the new Buyer and in most cases provide for the financing.  Retaining the Seller for a period of time can make all the difference to the Buyer and more immediate success.

Do Buyer’s Need A Business Broker To Buy A Business?

No, but Buyers usually do not want to run the risk of “going it alone” when looking for good opportunities that are properly evaluated and priced, in order to reduce their risk.  Without a Business Broker, there is no facilitator to be a go-between in the due-diligence fact finding period and in the period of negotiations.  Even if a Buyer enlists outside professionals such as an attorney or an accountant to help, it is the Business Broker who possesses the skills necessary to effectively facilitate a business sale.  A Business Broker has many types of businesses for a Buyer to consider and often a Buyer may end up buying a business they hadn’t contemplated buying initially.  Buyers don’t often know what to buy and will look for the right opportunity, regardless of the type of business it is, as long as it meets with the Buyer’s buying reasons stated above.

Acquistion, Merger, or Partnership with an Existing Business

Midwest Business Associates, LLC currently has potential businesses  interested in selling or buyers interested in acquiring or merging with businesses.  Please go to the Mergers & Acquisitions under the About Us tab for current opportunities.

If you are interested in further exploring an opportunity for acquistion merger or investment in an existing company (business), contact MBA to see if there is a potential match. We will explain a confidential limited engagement process to facilitate the outcome most beneficial to you.