When you use the term “grow your business,” you’re probably thinking about organic growth: adding customers, adding staff to service customers, adding space to house your staff and inventory… growing the way you did when you started your company.
Here’s what’s making that kind of growth challenging right now. The number one factor for most companies is the labor shortage. Employers in almost every industry are having trouble finding qualified workers. Wages are rising across the board and it’s not uncommon to see signing bonuses being offered even to entry-level employees. The cost of recruiting, training, and retaining workers is growing every day. With inflation rising, consumers and business customers are thinking twice about where and how they spend their money. That makes finding and competing for new business more time-consuming.
But there’s another way. Mergers and Acquisitions are not just for the big guys; even a small business can consider buying another business. And purchasing brings several advantages.
First, buying an established business means you grow exponentially faster. The new company comes with its own customer base and its own skilled workforce. Purchasing increases your market share quickly; you can acquire more customers in the sale than you could with years of prospecting and selling on your own.
Your company may benefit in more ways than simply increasing in size. The acquired company may have business processes, technology, or systems that could enhance or even replace your current ones. The new company’s culture may bring fresh perspectives and an infusion of new ideas.
If you’ve never entertained the idea of buying a business, here’s what you’ll need to consider.
First, says business broker Bianca Evans, don’t be afraid to think big – at least bigger than your current company. “Most small business owners think they should only consider a smaller business,” she says. “There’s no reason you can’t stretch to afford a slightly larger business, one that will bring more advantages for you.”
A qualified business broker can help you find the right company to buy. You may think that only businesses in trouble are considering selling, but there are many reasons a healthy company might come on the market. Family business founders with children who aren’t interested in taking over. Owners who are facing health issues or thinking of retirement, or who are simply ready to move on. Every year, more than 500,000 businesses change hands, and that number is expected to skyrocket in the next several years as millions of baby boomers accelerate their retirement timelines and sell their businesses.
A business broker can also help you value the new company (and your own) so you understand the true cost of the business and how much you’ll need for funding. Funding is usually what keeps owners from considering an acquisition, but the math doesn’t have to be that scary.
Many small business owners think that to buy a business, you have to have the full sale price in your back pocket. But that’s rarely the case. SBA-backed financing is readily available; banks will loan you the money and fund your acquisition. Typically, they’ll ask for 10-20% of the purchase price down. For a $500,000 loan, that’s just $50,000 – $100,000 due at closing.
Not a bad deal. But there is more help available. Since there is little buyer competition for most businesses, you (and the bank) can ask the seller to hold a portion of the note too. Five percent is reasonable, and in our example, that’s potentially another $25,000 that you won’t need to come up with at signing.
If you’re buying a healthy business, it should have enough operating capital to keep running while you invest your time and energy bringing the new employees and customers into the fold.
“The most difficult thing is the decision to act, the rest is merely tenacity.” – Amelia Earhart
About Bianca Evans
Bianca Evans is an experienced business broker based in Jacksonville, Florida. She is a top producer in her field. She has made over 170 transactions since 2006 which makes her among the most seasoned in the area. She is a Certified Business Intermediary (CBI), a Certified M&A Professional (CM & AP), a Board Certified Intermediary (BCI), and has her B.S. degree from the University of Florida.
Other notable accolades and achievements:
•The Million Dollar Plus Award 2008, through 2020
•Dealmaker Award top 3% in the state for completed deals 2018
-Most dollars sold in North Florida in 2018, 2019, 2020
•Sold an array of industries including manufacturing, wholesale/distribution, service, retail, restaurants, professional offices, and more.
•25 years of Sales Experience
She maintains her professional networks by participating in a variety of associations including the International Business Brokers Association (IBBA) and the Business Brokers of Florida (BBF).
One interesting fact about Bianca is that she used to be a business owner herself! She has been on both sides of the transaction when she purchased and later sold that same business. She finds that perspective invaluable when relating to her clients and balancing the many details and emotions.