Expanding a Small Business via Acquisition? Watch out for this HR cash flow landmine

Expanding through acquisition?  Watch out! Make this mistake and you could be in for an unexpected cash-flow cut! - How to Buy a Business.

How can buying a business make its’ value go down?

I had a chat with Sarah Mullins from UpTree HR in Halifax.

Sarah and I discussed some of the issues relating to HR when you buy a business or merge two companies in a strategic acquisition.

She’s been through dozens of them.

She even explains how buying another company can reduce its’ profitability.  If you haven’t done the right due-diligence, you could end up with less cash flow that you had forecast.

Watch the interview here: https://youtu.be/Bstm-Pm8hbs

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

Learn how I help people sell their business at www.HowtoSellMyOwnBusiness.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.

Thanks and I’ll see you next time. 

Buy a Business with No Money?!? Part II. How to Buy a Business

I made this video a few weeks ago 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

Cody, one of my viewers, sent in this thoughtful question in reply to the video:

Hello David, thanks for all the videos. Have a question: I have heard of people buying businesses through 100% financing, but not technically no money down.

So they first go to a lender and borrow against the assets of the business to raise cash, which they then give some or all that cash to the seller, as a down payment.

Then they get the Vendor(Seller) to carry some kind of financing on the rest, the seller is in a junior position to the lender in case the business fails.

In theory this should work great, the seller will get about as much cash at closing as they would if the seller liquidated.

Have you heard of this?

Does it work?

If it does work, is it easy to put together?

If it does not work, why not?

Great questions Cody! 

The problem with this scenario lies in two places… are we actually talking about buying a business or just a collection of assets?  The reason I ask is that if a seller is happy receiving an amount which approximates a liquidation then we’re not receiving operating capital or paying for goodwill.

If there is no goodwill value, is the business a profitable money maker?

Also, if you’re buying this as your first business then what would your opening balance sheet look like?  The banker will want to see.

I must admit though, this strategy would work for a different kind of buyer.  See my video response to learn who could pull this off. Watch: https://youtu.be/xZqJTa_YZj4

For a full education and help on buying a business, visit 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 just to the left of this post.

My fall season live events are filling up fast.  Find all my live events here: http://davidbarnett.eventbrite.ca

Thanks and I’ll see you next time.

The problem with 16 Hour Workdays - How to Sell a Business

I had the pleasure of speaking to a business owner in Toronto while I was away on vacation. It was just a brief consult done from a park bench in Brussels.

He and the other owners had become aware of a competing firm that had been acquired by a larger company and wanted to try to do the same thing.

The conversation centered around the best strategy… hiring an intermediary, hiring someone in-house to try to find a suitor, etc.

During this time, my client made a little comment about how he and the other founders of the company were working almost 16 hours a day and how they found it impossible to hire people to help them out.

I made this recording telling the story and how you can go about fixing it.  Listen here (audio only on YouTube): https://youtu.be/9n68EuvNXfw

Needless to say, it is quite difficult to convince someone to pay money to buy a business that needs this kind of management engagement.

Proper businesses have structure, organization and everyone knows what they’re responsible for and what duties they need to get done.  Without this, it’s impossible to grow and it sure does look scary for anyone looking at buying.

The topic was very apropos as I’m in the middle of creating my latest workshop; Building a Business that Someone Will Want to Buy.  It’s going to be presented on October 18 in Moncton, NB and will likely become an online course.

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

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

How to we evaluate buying PART of a business? How to Buy a Business

I received a question from one of my viewers in South Carolina.  Ben has an opportunity to buy part of a business and wants to know what he needs to do to figure out what it’s worth.

Splitting up businesses is a funny thing.  Usually businesses want to combine to realize synergies. 

Think of two companies merging and eliminating some of the administrative staff.  The result of the merger should be lower overheads as a percentage of sales.

I made this video to discuss what happens when you start splitting things up: https://youtu.be/zrKQWzxN58w

So if you buy part of a business and this leads to dis-synergies how do you figure out what a part of the business is worth?  Well, all you can rely on is the sales figure.

Start by taking the sales of the existing company for the department or product lines that you’re going to be acquiring, then build yourself a new income statement.

Be prepared for a tough negotiation though, the parts may often be worth less than the whole and the sellers expectations may be very different from yours.

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

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.