Sunday, September 25, 2016

'Just put in more money' - The truth about increasing equity when buying a business - David C Barnett



The seller's accountant Says, ‘You just need to put more money in.’ 

I have a client who is negotiating for a business which is overpriced. 

He’s demonstrated that the business will not cash flow for him after servicing debt and taking a reasonable salary for the value of his work.

The seller’s accountant has said, ‘the buyer just needs to put in more of his own money.’

I made this video to show how that doesn’t make sense at all: https://youtu.be/vTsIwe_If88



It’s got a little math, but it’s not too difficult.

The point of the matter is that equity (a business owner or buyer’s cash) actually demands a higher rate of return than debt.

This is because it’s riskier.  Lenders get paid first in the event of a liquidation.

If you put in more of your own money, you actually need an EVEN HIGHER rate of return.
Watch the video.

For a full education and help on buying a business, visit www.BusinessBuyerAdvantage.com

To learn how I can help you sell your business yourself, visit www.HowToSellMyOwnBusiness.com

If you’d like to learn how to create high returns by making local private lending and lease deals, check out http://www.LocalInvestingCourse.com The Local Investing Academy enrollment is from September 26 to October 10 only. 

For a quick introduction, read Invest Local.  It’s available from Amazon stores worldwide or as a .pdf here: https://gum.co/quoB

Please remember to like and share this article, it’s the only way the people who run the internet have of knowing if the content is any good or not. The more you share, the more likely someone who needs this information will be able to find it.

If you would like to hear from me weekly before anyone else, you can sign yourself up at www.DavidCBarnett.com  If you need my help with your project, give me a call at (506) 381-8416.

Do you live in the Maritimes?  I’ve got workshops coming up on buying and selling businesses in the fall.  Book now http://davidbarnett.eventbrite.ca


Thanks and I’ll see you next time. 

Sunday, September 18, 2016

What I see in the Market for Small Businesses - Buy a Business - Sell a Business



Well, spoiler alert, there is no market for small businesses.

I made this video to explain why. https://youtu.be/aOFhyYjFoYc



You see for a ‘market’ to exist, you need many buyers, sellers and a product or commodity.  For example, there is a market for 4-door used cars and a market for 3-bedroom homes in each town and city, but small businesses are very individual.  They’re unique.

Therefore, they each have their own market!

In the video I give an example of the process engineer who will never buy the highly profitable flower shop.  I used to see it all the time when I owned my business brokerage.

As far as pricing goes, it doesn’t change much over time except if certain industries are perceived to be more or less risky.  Business are valued on their cash flow and what the buyer is willing to pay is based on their perception of the risk that the cash will continue to flow into the future.

There is one exception though.  It’s an old story about market manipulation.

I’ve seen first-hand that government programs meant to encourage immigrant investors are causing price bubbles in certain categories.  Convenience stores, franchise food locations, Laundromats, gas stations.

Anywhere someone with limited English can run a simple business and quickly learn enough words to make change and serve customers.

I recently worked on a case where a newcomer was willing to overpay by 40%... because he was up against a time-limit and if he didn’t buy a business he would lose a $75,000 deposit that he had made to get into the country.

Welcome to Canada, let us into your wallet.  I bet he feels all warm and fuzzy about igloos, beavers and maple syrup.

Just like in any market where politicians and civil servants decide to meddle, an artificial urgency has been created and business sellers are taking full advantage of these victims created by government policy.

For a full education and help on buying a business, visit www.BusinessBuyerAdvantage.com

To learn how I can help you sell your business yourself, visit www.HowToSellMyOwnBusiness.com

If you’d like to learn how to create high returns by making local private lending and lease deals, check out http://www.LocalInvestingCourse.com The Local Investing Academy starts in September.  For a quick introduction, read Invest Local.  It’s available from Amazon stores worldwide or as a .pdf here: https://gum.co/quoB



Please remember to like and share this article, it’s the only way the people who run the internet have of knowing if the content is any good or not. The more you share, the more likely someone who needs this information will be able to find it.

If you would like to hear from me weekly before anyone else, you can sign yourself up at www.DavidCBarnett.com  If you need my help with your project, give me a call at (506) 381-8416.

Do you live in the Maritimes?  I’ve got workshops coming up on buying and selling businesses in the fall.  Book now http://davidbarnett.eventbrite.ca


Thanks and I’ll see you next time. 

Sunday, September 11, 2016

Ed asks: What would David look for in a new franchise opportunity? How to Buy a Business - How to buy a franchise




Ed recently downloaded a copy of my 2015 Best-seller, Franchise Warnings from www.franchisewarnings.com

He wrote me an e-mail saying that he was looking at franchises and enjoyed the book.  He thought that the central theme of the book was ‘do your homework.’

It’s not.  The book’s purpose was to dispel the myth that buying a franchise is less risky than starting a business from scratch.  Watch the video here: https://youtu.be/JUItDU5cn-E



Ed also asks what I would look for if I were buying a new franchise.  Interesting question.
My first idea is that I would want a fee based franchise over a royalty based one.  It allows you to grow the business and keep more of the gravy for yourself.

Secondly, I would need to ensure that the business systems were actually provided and worked well.  I know of a two franchises who provide no operating manual and one where the systems are very poor. (I’m sure they’re not alone.)

For my third item, watch the video ;)

To learn more about buying a business, visit www.BusinessBuyerAdvantage.com

If you’d like to learn how to create high returns by making local private lending and lease deals, check out http://www.LocalInvestingCourse.com The Local Investing Academy starts at the end of September.  For a quick introduction, read Invest Local.  It’s available from Amazon stores worldwide or as a .pdf here: https://gum.co/quoB



Please remember to like and share this article, it’s the only way the people who run the internet have of knowing if the content is any good or not. The more you share, the more likely someone who needs this information will be able to find it.

If you would like to hear from me weekly before anyone else, you can sign yourself up at www.DavidCBarnett.com 

Do you live in Toronto or the Maritimes?  I’ve got workshops coming up for Toronto in September on buying and selling businesses and in October-December in the Maritimes.  Book now http://davidbarnett.eventbrite.ca


Thanks and I’ll see you next time. 

Sunday, August 28, 2016

How to Buy a Business with NO MONEY- Should you? David C Barnett



How to buy a business with NO MONEY?

I’ve gotten some questions from viewers asking how they could buy a business with no money. 
There is a belief out there that if you can structure things correctly, it’s possible to buy a profitable business while using none of your own money.

I’ve done deals where a buyer borrowed all the money to buy a business, but they did so by putting up some personal assets as collateral.

I’ve done deals where a buyer gets a seller to essentially finance 100% of the purchase, but the buyer was using lots of their own money to improve the business with a short timeline to re-financing it. 
In both cases, we can hardly say that the buyers had ‘no money.’  They certainly had resources to help them make the deals happen.

I made this video to explain the different scenarios that someone might conceivably buy a business with no money and the dangers for the buyers and sellers in each. Watch: https://youtu.be/NVTgDT7Cc2g



In asset purchases, the danger for a buyer, even if there is no down-payment, is that there will be insufficient operating capital and you’d be in a cash flow crisis from day one.

In share deals, if there is a net-positive operating capital balance, the buyer could fleece the company and run away with cash and the seller would be left with nothing.  Who would put themselves in this kind of position other than a parent handing over a business to a child?

The one opportunity for buyers to get their hands on a business with ‘no money’ is usually when there is negative equity.  Watch the video to see my thoughts on this.

If you’d like to learn how to create high returns by making local private lending and lease deals, check out http://www.LocalInvestingCourse.com The Local Investing Academy starts in September.  For a quick introduction, read Invest Local.  It’s available from Amazon stores worldwide or as a .pdf here: https://gum.co/quoB 

http://www.localinvestingcourse.com


Please remember to like and share this article, it’s the only way the people who run the internet have of knowing if the content is any good or not. The more you share, the more likely someone who needs this information will be able to find it.

If you would like to hear from me weekly before anyone else, you can sign yourself up just to the left of this post.

Do you live in Toronto or the Maritimes?  I’ve got workshops coming up for Toronto in September on buying and selling businesses and in October-December in the Maritimes.  Book now http://davidbarnett.eventbrite.ca


Thanks and I’ll see you next time. 

Sunday, August 21, 2016

Why can’t a borrower offer the same collateral to many lenders?



I got a question from a viewer in Prince Edward Island the other day. 

He had read my 2014 best-selling book, Invest Local, and had a question about preparing information for a lawyer in order to register security on a lending deal.

Many people who are contemplating investing in a small business via making a secured loan often wonder how they can make sure the borrower isn’t offering the same collateral to more than one lender.

I made this video to explain how registries work and give a brief history of how they came to be. Watch: https://youtu.be/MeFAmvf6veE



The PPSR registries (or UCC registries) allow you to publicly record the fact that a certain piece of property has been pledged as loan collateral.  They’re the most versatile registries because you can record a lien on almost any kind of property (outside of real estate.)

The system is so straight forward that many local investors register their own security using online services.  This is in contrast to real estate registries which are strictly the domain of attorneys because they are so complex and every jurisdiction is unique.

I’ve done dozens of deals where I’ve registered myself, using a third party service provider,  as a lender in a PPSA database.  I’ve also done many lien-searches when investigating the purchase of used vehicles or equipment.

It’s critical to learn how this works if you want to deal in lending or used equipment because a lender’s rights under a lien don’t go away if the property is sold. 

Simply put, if you buy an RV and there is an outstanding loan secured against it and the loan goes into default, the lender can still take it to satisfy the debt whether you bought it or not.

If you’d like to learn how to create high returns by making local private lending and lease deals, check out http://www.LocalInvestingCourse.com The Local Investing Academy starts in September.  For a quick introduction, read Invest Local.  It’s available from Amazon stores worldwide or as a .pdf here: https://gum.co/quoB

Please remember to like and share this article, it’s the only way the people who run the internet have of knowing if the content is any good or not. The more you share, the more likely someone who needs this information will be able to find it.

If you would like to hear from me weekly before anyone else, you can sign yourself to the left of this post.

Do you live in Toronto or the Maritimes?  I’ve got workshops coming up for Toronto in September on buying and selling businesses and in October-December in the Maritimes.  Book now http://davidbarnett.eventbrite.ca

Thanks and I’ll see you next time.





Sunday, August 14, 2016

Why do some business sellers make you WAIT so long for info? How to Buy a Business - David C Barnett



Why does the seller make me WAIT so long for information?

I got a call from a client the other day.  He’s been trying to decide if he wants to pursue a business that is rumoured to be for sale.

I say ‘rumoured’ because it certainly doesn’t seem like it’s for sale.  The owner says he wants to sell, he speaks highly of the business and its potential, but he just won’t hand over the information the buyer is asking for; the latest financial statements.

What on Earth is going on? I explain the possibilities in this video: https://youtu.be/BwNY7cpSZhI



The first thing that is obvious is that this seller hasn’t read my best-selling book; How to Sell MyOwn Business. If he had, he would know that you never go out looking for buyers and talk with them before you’re completely prepared to answer all their questions and you’ve got your ‘package’ together. 

Putting together Confidential Business Profiles is part of what I do for my clients.

From the seller’s perspective here’s what may be going on:
  1. There may have been a pressing emotional or personal need which pushed the owner to decide to sell and this need may no longer be so aggravating.
  2. If the business is profitable, then the longer the seller delays the sale, the more money they make in the interim.
  3. There may be some pressing business needs that require their attention in the present, selling the business may actually be a ‘side project’ and doesn’t get the proper attention.
  4. Outside advisors or service providers like accountants may not be available because of workloads or vacations.
Let’s be clear, any delays caused by the seller are not good for the deal. They upset the buyer and buyers can be hard to find.

One of the hazards of this scenario is that the more a buyer follows up and ‘chases’ the seller, the more the seller may begin to think that the buyer is in love with the business.

This can cause them to believe they can get more money for the business.  As a buyer, this is bad.
So stop it.  Stop following up, emailing and calling the seller continuously.  Slow down. Look at other businesses.

One of the problems from a buyer’s point of view is that they may be imagining themselves as the owner.  They start to get excited and REALLY want to buy the business NOW. 

This is called Buyer Fever and it’s a very dangerous illness.  It can cost people hundreds of thousands of dollars in over-payments when it leads them to make bad deals and not do proper due-diligence.

If you’d like help to buy or sell a business, call me at (506) 381-8416 or visit www.HowToSellMyOwnBusiness.com or www.BusinessBuyerAdvantage.com

Please remember to like and share this article, it’s the only way the people who run the internet have of knowing if the content is any good or not. The more you share, the more likely someone who needs this information will be able to find it.

If you would like to hear from me weekly before anyone else, you can sign yourself up just to the left of this post.

Do you live in Toronto or the Maritimes?  I’ve got workshops coming up for Toronto in September on buying and selling businesses and in October-December in the Maritimes.  Book now http://davidbarnett.eventbrite.ca

If you’d like to learn how to create high returns by making local private lending deals, check out http://www.LocalInvestingCourse.com The Local Investing Academy starts in September. 
Thanks and I’ll see you next time.