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    The Streetwise Guide to Buying and Selling Your Business
    The Streetwise Guide to Buying and Selling Your Business
    The Streetwise Guide to Buying and Selling Your Business
    Ebook187 pages4 hours

    The Streetwise Guide to Buying and Selling Your Business

    By Alex Coxon

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    About this ebook

    Everyone dreams of owning their own business at some time or other during their life, usually just after a job application has been turned down, or they have received their redundancy cheque, or that bastard of a boss has given them a particularly bad day.

    But few people end up owning one.
    Why is this? There are thousands of businesses for sale. Many of them do not require much money and most of them take many months if not years to sell.

    The reason so few people do not realise their dream of buying a business is the existence of a number of myths that have grown up over the decades about buying a business. These myths state that:

    1. Buying a business is complicated
    2. Buying a business needs lots of cash
    3. Buying a business needs lots of experience
    4. Buying a business needs lots of professional advice
    5. Buying a business is very risky

    This book will explode those myths. It will show you how buying a business can be simple, safe and lots of fun, and that it is not restricted to consenting adults with bevies of advisers. But, when you have a business, it is important that you always keep in mind the sale of it. Running a business is fun, but hard work. Most of your focus will be on the financial rewards from the day to day running of the business, but often the greatest financial reward comes from selling the business.

    Too often a business sale is a last minute decision. Sometimes brought on by financial reasons. Sometimes for personal reasons. More often because you just do not plan ahead. Those are the times when bargains can be bought. If you want to get the best price for selling your business then you need to plan at least 2 years ahead. That gives you time to get all the ducks lined up so that buyers just cannot resist your offer.

    To try to ensure that you don't become too confused by a two-pronged approach, you will find that the body of this book is written primarily from the point of view of the buyer. A seller's story, cunningly disguised as a blockbuster of sex, intrigue, deviousness and desperation, finishes the book.

    This book is not a ‘belts and braces’ (For ‘belts and braces’ read ‘accountants and lawyers’) approach to buying or selling businesses. This is a Streetwise Guide. The focus is on doing as much of the deal yourself as possible. For three reasons:

    1. You learn – not just about the business you are looking at, but business in general.
    2. It is cheaper up front – you don’t pay for accountants and lawyers until you really have to.
    3. It is more fun.

    The last is most important. You need to have fun when buying a business, and fun when running it. That is why I stress the importance of buying a business that is involved in something you enjoy.

    This is also a ‘cheeky’ book. Valuing a business is a mixture of art and science, emotion and facts. Your emotional state and the emotional state of your seller or buyer. The interpretation of the facts that are used to draw up the financial information. The book will talk about how to control your and other’s emotional state when buying or selling and how to ensure the financial facts are interpreted to your best advantage.

    Finally, The Streetwise Guides and its publishers offer all care but no responsibility if you follow advice from this book and it does not work out. Very little in business is black and white. Just many shades of grey. You have to decide on the decisions you make. In particular as to how much professional advice you receive. People do regularly run businesses without receiving any professional advice from either lawyers or accountants. I would encourage you to use them as little as possible but, at the end of the day, it is your family’s finances that are at stake. You have to decide whether you want full belts and braces or just a bit of string to stop your pants falling down.

    So read on, learn, make money and have fun!

    LanguageEnglish
    PublisherAlex Coxon
    Release dateAug 17, 2011
    ISBN9781466030176
    The Streetwise Guide to Buying and Selling Your Business

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      Book preview

      The Streetwise Guide to Buying and Selling Your Business - Alex Coxon

      About Streetwise Guides

      Streetwise, adj. Having the shrewd resourcefulness needed to survive in an urban environment

      You can have all the business qualifications in the world, but without knowing your way around the rough and tumble of business you will have little chance of success. There are myriad stories of MBA graduates, global marketing managers, ex heads of multi nationals, highly qualified academics, experienced accountants and lawyers who have tried to run their own business and failed miserably. Conversely, there are far more stories of individuals who have left school in their teens and built up very successful businesses. Some of these have become household names - Richard Branson, Charles E. Culpepper, George Eastman, Henry Ford, Soichiro Honda, Ray Kroc, John D. Rockefeller, Vidal Sassoon.

      A survey of 500 UK business owners and managers (of businesses with more than 50 employees) by The Institute of Leadership and Management found that only 32% had a university degree, 12% left school under the age of 16 and 7% did not even leave school with a basic school certificate.

      What these individuals lacked in formal education they made up for with their streetwise skills. However many of those would have learnt those skills the hard way, struggling for the first few years as they learnt the street fighting rules that you often need in business to survive and prosper.

      The Streetwise Guides will give you those skills. They will teach you how to work the system to your advantage. They will reveal the secrets and expose much of the hypocrisy in the business world, especially when dealing with bankers, accountants, lawyers and other business professionals. They will also teach you how to do business with the big end of town. They will show you the strengths and weaknesses of the Corporate World and teach you how they think so that you understand how best to deal with them, whether as a customer, supplier, creditor or debtor.

      The Streetwise Guide authors always welcome feedback and can be contacted on

      mailto:thestreetwiseguide@gmail.com

      *********************************************

      Chapter 1 Introduction

      So you want to buy a business?

      Everyone dreams of owning their own business at some time or other during their life, usually just after a job application has been turned down, or they have received their redundancy cheque, or that bastard of a boss has given them a particularly bad day.

      But few people end up owning one.

      Why is this? There are thousands of businesses for sale, as 30 minutes on the internet will show you. Many of them do not require much money and most of them take many months if not years to sell.

      The reason so few people do not realise their dream of buying a business is the existence of a number of myths that have grown up over the decades about buying a business. These myths state that:

      •Buying a business is complicated.

      •Buying a business needs lots of cash.

      •Buying a business needs lots of experience.

      •Buying a business needs lots of professional advice.

      •Buying a business is very risky.

      This book will explode those myths. It will show you how buying a business can be simple, safe and lots of fun, and that it is not restricted to consenting adults with bevies of advisers.

      "But why Buying AND Selling?" we hear you ask. Simple answer. If you are buying a business, you need to know all the tricks that sellers use to get rid of lemons. If you are selling a business, you need to know all the angles to ensure that you receive the best possible price.

      Tricks and angles is what this book is all about. For it is tricks and angles that will make all the difference between buying a bargain or buying a lemon. When you come to sell your business, it is tricks and angles that will ensure you get the best price.

      And it is important that you always keep in mind the sale of your business. Running a business is fun, but hard work. Most of your focus will be on the financial rewards from the day to day running of the business, but often the greatest financial reward comes from selling the business.

      Too often a business sale is a last minute decision. Sometimes brought on by financial reasons. Sometimes for personal reasons. More often because you just do not plan ahead. Those are the times when bargains can be bought. If you want to get the best price for selling your business then you need to plan at least 2 years ahead. That gives you time to get all the ducks lined up so that buyers just cannot resist your offer.

      To try to ensure that you don't become too confused by a two-pronged approach, you will find that the body of this book is written primarily from the point of view of the buyer. A seller's story, cunningly disguised as a blockbuster of sex, intrigue, deviousness and desperation, finishes the book.

      This book is not a ‘belts and braces’ (For ‘belts and braces’ read ‘accountants and lawyers’) approach to buying or selling businesses. This is a ‘streetwise guide’. The focus is on doing as much of the deal yourself as possible. For three reasons:

      1. You learn – not just about the business you are looking at, but business in general.

      2. It is cheaper up front – you don’t pay for accountants and lawyers until you really have to.

      3. It is more fun.

      The last is most important. You need to have fun when buying a business, and fun when running it. That is why we stress the importance of buying a business that is involved in something you enjoy.

      This is also a ‘cheeky’ book. Valuing a business is a mixture of art and science, emotion and facts. Your emotional state and the emotional state of your seller or buyer. The interpretation of the facts that are used to draw up the financial information. The book will talk about how to control your and other’s emotional state when buying or selling and how to ensure the financial facts are interpreted to your best advantage.

      Finally, The Streetwise Guides and its publishers offer all care but no responsibility if you follow advice from this book and it does not work out. Very little in business is black and white. Just many shades of grey. You have to decide on the decisions you make. In particular as to how much professional advice you receive. People do regularly run businesses without receiving any professional advice from either lawyers or accountants. We would encourage you to use them as little as possible but, at the end of the day, it is your family’s finances that are at stake. You have to decide whether you want full belts and braces or just a bit of string to stop your pants falling down.

      The book is divided into six parts:

      Part I will look at starting points. We will look at attitudes, for it is your attitude more than anything else that will determine whether or not you end up fulfilling your dream or simply become yet another What if? person, spending the rest of your life thinking What if I had bought that franchise?. What if I had sold the house and bought that charter yacht?. What if I had moved on that company?. We will look also at goal-setting, where to start, where to look and how much to spend. And we will address that thorny question of whether you should buy an existing business or start something up from scratch.

      Part II will look at specific types of business for sale, whether or not they may be suitable for you and, if so, what specific things you need to look for if buying one. We will look at retail, manufacturing and processing, wholesaling and importing, the service industry, business to business selling, franchises and the ubiquitous 'get rich quick' schemes and scams. We will also look at spotting a bargain business and buying that potentially greatest of bargains, the insolvent business.

      Part III will cover the number-crunching aspects of buying a business. In particular: valuations and valuers, some of the more blatant fiddles some sellers use, and the more subtle bits of creativity that you need to look out for in balance sheets. This part may be of particular interest to those of you looking at selling your business - for obvious reasons!

      Part IV is all about 'the little people'; the sales agents, accountants, lawyers, bankers and other little leprechauns who can make or break the deal for you. These 'little people' can cause you big problems and they are often the cause of a good deal being stuffed up. So, we will see how these people tick and how you can motivate them to ensure that your deal goes through with the minimum of fuss and the minimum of fee!

      Part V is about 'doing the deal'. What to negotiate on, how to do it and what skills you need to make sure you are a better negotiator than they are. We will also look at buying limited liability companies, tax losses, signing of contracts, payment terms and the various techniques for minimising your risk. We wrap this section up with a case study of a client buying a $1.3 Million business with only $100,000 cash.

      Part VI is, arguably, the most important part of the book - what to do after you've bought it. The immediate action you take on buying a Business can dramatically affect its success or failure. In the first month, you may have to change the culture, address unprofitable areas, motivate the staff and retain customers. You also have to learn how to deal with the outgoing owners and their influence on the business.

      So read on, learn, make money and have fun!

      *********************************************

      PART I Starting Points

      *********************************************

      Chapter 1 – where to begin

      A very common state when people first think of buying a business is confusion, They start to look in the paper and are swamped with advertisements and 'opportunities of a lifetime',

      So they seek advice from friends. DVDs mate. That's what you want to get into, especially the dirty ones No says the guy next to him at the bar Buy a wrecking yard. It's all cash in the back pocket and you can fiddle the stock

      Very helpful! Then they start talking to 'experts'.

      They approach accountants: Well, in my considered opinion, Ms Jones, I would recommend a wrecking yard - you have the advantages of good cashflow and flexible accounting options

      They approach brokers: Now, I have a client who has made a lot of money from worms. (Possibly by employing them, you think!)

      Sometimes, god save us all, they ask their bank manager:

      "Well, that's difficult to say. Why don't we discuss it over lunch? You paying?" Everyone will offer different advice and all from completely the wrong point of view. You see, they'll all look at it from the point of view of which is the best business to make money from.

      But if you look at a business simply as a way to make money you increase your risk of failure and are headed for a potentially miserable life. (Very few people get rich deliberately, and most of those who do become real miserable buggers!) This may seem a strange thing to say. Surely business is all about making money? Not so.

      Does It Look Like Fun?

      Business is about having fun and making money. In that order.

      If you are unhappy in your work, you won't enjoy doing it and you won't do it to the best of your ability. Just like a real job. So, before you start looking at different businesses to buy you must first get out a piece of paper and draw a line down the middle.

      On the left-hand side you write down all the things you like doing: reading, long trips in the country, travelling, photography, sex. On the right -hand side you write down all of the things you don't like doing: seeing bank managers, forced conversations at parties, public speaking, driving in heavy traffic etc.

      This list should also help identify all the things that you are good at. Most people enjoy what they are good at but it is a little pointless buying a bricklaying business just because you are a good brickie if you actually hate laying bricks. You will probably be more successful at something you are less skilled at but enjoy more.

      Put the piece of paper to one side and leave it for a few days. Then take it out again and look at what you have written. Do you really like sex that much? Add some more things to your list.

      Now give it to your partner for their opinion and feedback: No, you don't like sex that much! You change it again.

      This then becomes your business-buying bible. Every time you look

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