Wednesday, June 12, 2024

Credit Score and Business Loans

 


 ***New Video Alert!

Peter has a Hospital putting him into collections!

Will this reduce his credit score?

Will this mean no ability to borrow for a business loan?

It’s complicated but not hopeless.

Learn more by watching this week’s video: https://youtu.be/kMJCKmlDuQQ 


Cheers


See you over on YouTube

David C Barnett


Saturday, June 8, 2024

So If You Want to Buy a Business – Here’s What You Should Do Next

Today, I've got a question from a viewer and his name is Vincent, who's 27 years old at that time. He wants to buy a business from one of these baby boomers that he keeps hearing about who are going to have to start thinking about retiring one day. Now he wants to know what he needs to do today in order to buy one of these businesses.


I'm going to give Vincent and many of you out there who are in the same situation some advice on what you can do today. Some of it is going to be pretty glamorous and exciting advice, and some of it is going to sound pretty boring. But it's the boring stuff that you really need to focus your attention on. Watch the full video here: https://youtu.be/SAIiek5ZQz4 


Start Saving Money

The number one thing you have to do as a 27-year-old to buy a business from a baby boomer is start living below your means and save money. Yes, I know. It's pretty boring. But you need to save money because you're likely going to have to put some kind of cash down in a deal, or at least have cash available to pay people like lawyers, accountants, and other specialists who are going to help you finalize your deal and close it. Largely, that kind of money comes from savings. If you need to borrow money and others see that you have no savings, they'll wonder if you can't manage your own life, how will you manage a business? 

Develop Your Credit

Number two, start developing your credit. Get a credit card and use it responsibly. Put a little balance on it and pay it off, and repeat. This will help your credit score rise and qualify you for larger credit facilities. These may be personal facilities, but you may need to draw on them in the future for a deal. Start saving money, and start developing your credit score to get it high and develop credit facilities. Going into a bank, asking for a line of credit, buying a house, getting a mortgage—these actions will help improve your credit and net worth, making you look better on paper.

Choose the Right Industry

Now, let's think about the business you want to buy. Some industries are dominated by big players, while others have fractured ownership with lots of independent family-owned businesses. For example, the pipeline industry is controlled by a few giant companies, while auto repair has many small, family-owned businesses. You need to look at your skill set and interests and decide what kind of industry you would like to be in. Align that interest with an industry that has lots of independent owners because these are the people likely to sell their business to you. Put yourself into a field with rich opportunities where you'll have plenty to choose from. You don't want to have to buy a specific business just because it's the only independent one around.

Gain Industry Experience

Next, start working in that industry. Even if you're not a business owner, look for a job in that industry to develop industry-specific skills and knowledge. This is crucial because when it's time to buy a business, bankers will want to know that you have experience in that industry. If you can get a job as an assistant manager or manager, even better. You'll be able to show direct experience in managing that kind of business.

Take an Online Course

Consider signing up for my online course, Business Buyer Advantage. It's easy, cheap, and will teach you what to look for in a business, how to properly examine financial statements, do a normalization, and figure out roughly what a business is worth. When it comes time to make the purchase, you can give me a call, and I'll help you out.

Build Relationships with Suppliers

Lastly, and this is one that not many people will talk about, once you're working in that industry, start to meet and develop relationships with the suppliers in that industry. Even if your job isn't in purchasing, find out who the sales reps are or which businesses your employer buys from. Create relationships with those people. When a younger person buys a business, they often have difficulty with financing and putting the deal together. Suppliers can help you if they choose to. They help people they like, have confidence in, and believe in. For example, in an auto repair business, if you can build a relationship with a parts supplier, you could ask for help with a loan or extended terms when buying a business. These relationships can have a huge impact on your operating capital.

Conclusion

It's not very likely that you'll go out as a 27-year-old and buy a business from a baby boomer immediately, but here's the good news. All those statistics about baby boomers selling their businesses and the huge transfer of wealth are based on the faulty assumption that people retire at 65. 


In small business ownership, people often stay on longer. So, you'll have plenty of opportunities over the next 10 to 15 years. It's better to bide your time, get prepared, and be in a solid position to make a good deal rather than jump at an opportunity when you're not ready. You need stability as business can be risky.


Cheers!

David C. Barnett


 

Wednesday, June 5, 2024

Best Businesses for the End of the World

 


***New Video Alert!

What scares you more, Fire or Zombies?

This week, I take a look at disaster planning and preparation and explain the best kinds of businesses to own if it’s all coming to an end.

Learn more by watching this week’s video: https://youtu.be/OMHfrdVUbLE 


Cheers


See you over on YouTube

David C Barnett



Saturday, June 1, 2024

Deceptive Webinars Rant

Can you trust the people you’re doing business with?

What if they make it obvious that they’re liars?


Would you still do business with them?



My deceptive online webinar experience:

The webinar was only offered a couple of times over the weekend, and I happened to have my children with me over the weekend, which rules out daytime online activities like webinars because my kids are young and they interact with me at a minimum every 10, 15, 20 minutes. 


Being in Atlantic Canada, I joined a West Coast webinar at 11 p.m. my time. During the 90-minute session, the host asked for feedback and commented on the chat, but I couldn't see any of the interactions he mentioned.


I realized it was likely a recording when I didn't see any other participants' inputs. Despite this deception, I stayed for the content but felt betrayed. If the host had simply shared a recording, I could have watched it at a more convenient time. This deceit made it hard for me to trust and buy from him.


I find it frustrating when marketers use such tactics. It's essential to be honest, especially in online sales and presentations. Deception undermines trust and rapport, which are crucial for successful business relationships.


So anyway, that's my rant. It annoys me when people are deceptive in this fashion, and clearly in a way that was so easily detected by anyone who stops and thinks a little bit and knows how to interact within the online platform.


Wednesday, May 29, 2024

Global Citizens buying US Businesses

 


***New Video Alert!

Can someone take advantage of the SBA program to buy a business in the US without even going there?

I’ll tell you when foreigners can and cannot use SBA loans and how someone might reasonably be able to buy a business in the US.

With or without money.

Learn more by watching this week’s video: https://youtu.be/tRGW56_DYAI 


Cheers


See you over on YouTube

David C Barnett


Sunday, May 26, 2024

What You Need to Know about Buying a Business in 2024 feat. SBA Ray

 


David shares his insights on transitioning from searcher to operator, making offers, and how sellers choose the best offers (hint: it’s not always the highest bid). We explore the nuances of buying and selling small businesses and discuss the current wild and unpredictable state of the market. Whether you're an aspiring business owner or a seasoned entrepreneur, there's something here for you.

Saturday, May 25, 2024

Beware of Balance Sheet Landmines in Small Businesses

When purchasing a small business, especially one with appealing earnings, it’s crucial to examine more than just the income statement. This lesson came to light during a recent consulting session with new Chinese entrepreneurs seeking to buy a retail store.

 

The Initial Red Flag

The prospective buyers were excited about the store's earnings, but my request for a complete set of financial statements—beyond the provided income statements—raised concerns. The current owner, who had been in place for a year and a half, hesitated to provide his own balance sheets. This lack of transparency set off alarm bells.

The Management Fee Mystery

Among the expenses, the income statement listed a management fee of $21,000. The owner claimed this fee, along with a salary, reduced the business’s taxable profit to zero—a common and legal tax strategy. However, the balance sheet revealed the fee had never been paid out; it was still owed, indicating the company lacked the cash due to principal debt payments.

The Critical Role of Balance Sheets

This scenario underscores the importance of reviewing the balance sheet, which provides a snapshot of the business’s financial health on a specific date. Unlike the income statement, the balance sheet can expose hidden liabilities, such as unpaid management fees or debt obligations, which can severely impact cash flow.

Manipulating Financial Statements

Owners can also manipulate inventory counts to adjust the cost of goods sold (COGS) and affect reported profits. By inflating or deflating inventory levels, they can paint a misleading financial picture. This tactic, known as "painting the tape," can make a business appear more profitable than it is.

Conclusion

When evaluating a business, always request comprehensive financial statements, including balance sheets and cash flow statements. These documents provide a complete and accurate story of the business’s financial state, helping you avoid hidden "balance sheet landmines" that could jeopardize your investment.

By being diligent and thorough in your financial review, you can make a more informed decision and safeguard your investment against unforeseen financial pitfalls.

Click here to download a balance sheet checklist we’ve prepared for you this week.

Cheers


David C Barnett- don’t forget to subscribe to the email list if you haven’t already https://www.DavidCBarnettList.com