Should I Buy or Start a Business Now?

Should I Buy or Start a Business Now?

BY:
Nimi Natan
Division President & CEO
Gulf Coast Small Business Lending

 

As a small business lender, I get many questions regarding the state of economy. In the past few months, the overarching theme has been: “should I buy or start a business now and if so, how?” Our economy is facing a near unprecedented number of stress points including persistent inflation; recessionary pressures; high interest rates; supply-chain interruptions; and labor shortages. For the foreseeable future, we will likely experience declining sales and profits. Fortunes are made in times like these so it is absolutely a great time to invest. Good businesses are available to purchase at reasonable prices, vendors are more interested in extending terms and opening new accounts, and while more difficult to find, financing is available.

My suggestions, featured below, are relevant for strong and weak economic conditions; however, the challenges today require a level of precision that is not as critical in a growing economy.

First, buy a good business. It seems obvious, but keep in mind that now is not the time to attempt a turnaround. A good business has decent margins, diverse customer base, tenured staff, and no extraordinary working capital, and/or capital expenditure needs. An established franchised restaurant, for example.

Second, don’t overpay. Small businesses with good margins and growth rates are worth up to 4-5X cash flow, based on average cash flow for the past four to five years. Businesses with proprietary technology or unique and recognized brands are worth 6-8X, with more commodity-type businesses worth 3-4X. Enlist the help of an accounting professional to go over the financials and scrutinize add backs.

Thirdly, finance conservatively. A strong balance sheet is critical for surviving the next few quarters. Use more equity even if it means bringing in partners. Rely on conventional and/or SBA financing, and DO NOT use hard-money and MCA lenders. If the seller offers financing, insist on conventional terms and be prepared to have it subordinated to conventional lenders. If you find that you must use aggressive financing, it is a sign you are overpaying or swallowing more than you can chew and you should consider walking away.

Next, don’t forget working capital. We see it again and again. Buyers think that income and EBITDA or broker’s SDI equate to free cash flow. For most businesses, that’s not even close and you must incorporate the working capital and capital expenditure needs into your projections and financing. If you are not sure what all this means, ask an accounting professional to help you project cash flow.

Lastly, pursue operational excellence. This one also might seem obvious; however, you should only invest in a business you fully understand and in line with your experience. This is critical for assessing the opportunity as well as running the business. If you find a business you think you love but lack the experience, consider bringing in an operational partner.

In conclusion, I’ll use an analogy: you are about to board a ship headed into a storm of unknown magnitude. Be sure that the boat is sound and gassed and that the captain (you!) is experienced. Doing so will give you the best possible opportunity to achieve entrepreneurial success.

For more information about Gulf Coast Small Business Lending, please contact:

Jim Frey, SVP – Business Development Officer

Gulf Coast Small Business Lending
Office: (724) 259-3182
Mobile: (724) 600-4409
Conflict Management and DEI Consulting and Training Company with Major Government Contracts

Conflict Management and DEI Consulting and Training Company with Major Government Contracts

This 30 year-old leading provider of workplace solutions offers conflict management, organizational development and diversity, equity and inclusion consulting, coaching, and training to clients nationwide from their headquarters in Washington DC. Clients include major government agencies, global corporations and non-profit organizations who want to support the health and well-being of their employees and the effectiveness of their organization.  The owner wishes to retire.

Key features of the business:

  • Solid staff in place and a large network of contractors around the U.S.
  • Diverse and highly experienced employees with extensive experience and training
  • The Diversity, Equity and Inclusion industry, of which this business is a part, is expected to grow to $15.4 billion by 2026
  • Seller who is willing to train and assist the buyer with a smooth transition

Asking Price: $1,200,000

 

Financial Summary
  2022* 2021 2020 2019
Revenue $ 1,314,982.00 $982,236 $989,164 $1,047,812
Cost of Goods Sold $388,000 $417,472 $398,024 $566,775
Gross Profit $926,982 $564,764 $591,140 $481,037
Gross Profit Percentage 70% 57.5% 59.8% 45.9%
Seller’s Discretionary Earnings TBD $161,000 $163,297 $159,323

*projections from owner include revenue from two new 5-year government contracts

 

Please Contact: Richard Stopa (RStopa@harvestbusiness.com or 703-307-1187) to discuss this business in more detail.

Open with Adobe Reader, use their Fill and Sign Feature to complete and electronically sign the document, then return to RStopa@harvestbusiness.com.
We will then be able to discuss financial details and other confidential information about the business with you.
Disclosure: We have relied on information provided and approved by seller and make no additional representations or warranties. Buyers should review with their advisors as needed

Clients choose Harvest Business Advisors for our sage advice on profitably growing their business, accurate business valuations, and when the time is right, a consistent ability to deliver a high price as part of a smooth exit transaction. Harvest Business Advisors provides business brokerage, business valuation, and business succession planning services.

We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at info@harvestbusiness.com or 877-838-4966 to discuss selling your business, ordering a business valuation or buying a business.

 

Structural Steel Installation and Fabrication in Mid-Atlantic Market

Structural Steel Installation and Fabrication in Mid-Atlantic Market

COMPANY PROFILE
– In business for 28+ years
– Job sites in the DC metro and throughout Maryland
– Multiple revenue streams (structural construction, fabrication, welding)
– Key management team
– Established relationships with supplier and customers
– Multiple growth opportunities
– Average SDE (sellers discretionary earnings, 2018-2020) $615k

BENEFITS TO BUYER
– Consistent financial results
– Long-term staff
– Owners understand the need for a smooth transition and will support buyer as needed
– Turnkey business processes
– Value of hard assets $1.0mm

BUYER PROFILE
– An owner/operator looking to acquire an established, well know business
– A strategic buyer searching for growth / diversification opportunities


Please Contact: Eddie Davis (EDavis@HarvestBusiness.com or 301-325-7687) to discuss this business in more detail.
Open with Adobe Reader, use their Fill and Sign Feature to complete and electronically sign the document, then return to EDavis@HarvestBusiness.com.
We will then be able to discuss financial details and other confidential information about the business with you.
Disclosure: We have relied on information provided and approved by seller and make no additional representations or warranties. Buyers should review with their advisors as needed

Clients choose Harvest Business Advisors for our sage advice on profitably growing their business, accurate business valuations, and when the time is right, a consistent ability to deliver a high price as part of a smooth exit transaction. Harvest Business Advisors provides business brokerage, business valuation, and business succession planning services.

We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at info@harvestbusiness.com

Healthcare Consulting Business for Physician Practices and Accountable Care Organizations

Healthcare Consulting Business for Physician Practices and Accountable Care Organizations

This well-established 10 year old healthcare company devises and implements cost-effective solutions to help healthcare systems, organizations and providers increase revenue and ensure the most successful medical operations possible. The business is located in Maryland and the owner wishes to retire.

Core competencies include:

  • Managed Care Contracting
    • Contract Review and Fee Negotiation
  • Coding, Compliance & Education
    • Risk Adjustment Reviews
    • Coding support
    • Compliance Reviews & education
  • Healthcare Management Consulting
    • Practice Assessments
    • Due Diligence Reviews

Key features of the business:

  • A $1.3 M sales pipeline
  • Solid staff in place and a high number of repeat customers
  • Proprietary software that can be developed into new profit center
  • Growth industry in a fast-growing geographic region
  • Seller who is willing to train and assist the buyer with a smooth transition

Financial Summary

2022 (Projected) 2021 2020 2019
Net Income $ 1,912,962 $ 1,633,438 $ 1,280,819 $ 911,326
Net Profit (Loss) Before Taxes $ 464,000 $ 62,111 $ 92,094 $ (16,601)
ADJUSTED NET INCOME $ 544,160 $ 277,271 $ 269,585 $ (29,261)

 

Please Contact: Richard Stopa (RStopa@harvestbusiness.com or 703-307-1187) to discuss this business in more detail.
Open with Adobe Reader, use their Fill and Sign Feature to complete and electronically sign the document, then return to RStopa@harvestbusiness.com.
We will then be able to discuss financial details and other confidential information about the business with you.
Disclosure: We have relied on information provided and approved by seller and make no additional representations or warranties. Buyers should review with their advisors as needed

Clients choose Harvest Business Advisors for our sage advice on profitably growing their business, accurate business valuations, and when the time is right, a consistent ability to deliver a high price as part of a smooth exit transaction. Harvest Business Advisors provides business brokerage, business valuation, and business succession planning services.

We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at info@harvestbusiness.com or 877-838-4966 to discuss selling your business, ordering a business valuation or buying a business.

Specialty Product Sales and Installation

Specialty Product Sales and Installation

A unique, 45+ year old company that specializes in the sale and installation of products designed for promotional purposes, advertising campaigns, sporting events and a variety of recreational activities. The company has developed a diverse, loyal customer base that includes government and commercial customers and sales to individuals and organizations. Customers are located in the Baltimore / DC metro. Buyer will benefit from experienced and processes developed by the operational and sales teams.

 

Company Profile:

  • 45+ years, Baltimore MD based multi-generational family owned business
  • Job sites from Baltimore to N VA Multiple revenue streams (installation and product sales)
  • Key management team
  • Established relationships with supplier and customers
  • Multiple growth opportunities
  • Average revenue $1.6m
  • Average SDE (sellers discretionary earnings) $180K

 

Benefits to Buyer:

  • Consistent financial results
  • Long-term staff
  • Owners understand the need for a smooth transition and will support buyer as needed
  • Turnkey business processes

 

Buyer Profile:

  • An owner/operator looking to acquire an established, successful business family business
  • A strategic buyer searching for growth / diversification opportunities

 


Please Contact: Eddie Davis (EDavis@HarvestBusiness.com or 301-325-7687) to discuss this business in more detail.
Open with Adobe Reader, use their Fill and Sign Feature to complete and electronically sign the document, then return to EDavis@HarvestBusiness.com.
We will then be able to discuss financial details and other confidential information about the business with you.
Disclosure: We have relied on information provided and approved by seller and make no additional representations or warranties. Buyers should review with their advisors as needed

Clients choose Harvest Business Advisors for our sage advice on profitably growing their business, accurate business valuations, and when the time is right, a consistent ability to deliver a high price as part of a smooth exit transaction. Harvest Business Advisors provides business brokerage, business valuation, and business succession planning services.

We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at info@harvestbusiness.com

Specialty Fence and Deck Contractor with Multiple Revenue Streams

Specialty Fence and Deck Contractor with Multiple Revenue Streams

Company Profile: Deck and fence contractor, 15+ years, multiple revenue streams, key sales and management team, proven lead generation systems providing high quality leads, reliable/dependable construction crews. Customers ask for additional services. A great expansion opportunity for someone offering home repair work and looking for growth strategies. Real estate owned by seller, not included in sale.
Real Estate: Owned
Employees: 10
Furniture, Fixtures, & Equipment (FF&E): Included in asking price
Facilities: owned by seller, not included in sale
Growth & Expansion: customers ask for other home repair services; good opportunity for someone now providing home repair services
Support & Training: seller will provide reasonable transition period
Reason for Selling: retiring

Please Contact: Eddie Davis (EDavis@HarvestBusiness.com or 301-325-7687) to discuss this business in more detail.
Open with Adobe Reader, use their Fill and Sign Feature to complete and electronically sign the document, then return to EDavis@HarvestBusiness.com.
We will then be able to discuss financial details and other confidential information about the business with you.
Disclosure: We have relied on information provided and approved by seller and make no additional representations or warranties. Buyers should review with their advisors as needed

Clients choose Harvest Business Advisors for our sage advice on profitably growing their business, accurate business valuations, and when the time is right, a consistent ability to deliver a high price as part of a smooth exit transaction. Harvest Business Advisors provides business brokerage, business valuation, and business succession planning services.

We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at info@harvestbusiness.com