Wednesday, July 31, 2019

Summer report- 4 Businesses under LOI.



I hope you’re not too hot this summer.

The people in the Business Buyer Adventure group sure are.

Lots of activity going on including four businesses under LOI- An active entertainment business, a pet shop, an online business and a language business.

I must tell you though, there are some changes coming to this group program in September.

Namely the monthly billing option will likely be disappearing and I’m introducing tiers of membership.

Learn all about what’s going on in the update video: https://youtu.be/9lON2B4dJZQ 



Join the group.  Meet others like you who want to take action to buy a successful business.

Participate in our group calls and learn from other member’s deals.

Sign up here:
https://gum.co/BizBuyerAdventure 

Wednesday, July 24, 2019

Top Factors to watch when you’re running a business


Eric wants to know the top things to watch when tracking a business’ performance.

The best place to watch your business is from the financial statements!

You need to have the right data at the right time.

Otherwise you don’t know if you have a pricing, purchasing or overhead problem.

It’s the biggest problem I see in most small businesses.

Watch as I share some insights from my experience with some sample financials: 
https://youtu.be/9jpNizbGibk



Learn how to buy a successful business at https://www.BusinessBuyerAdvantage.com

Book a call with me at https://www.clarity.fm/davidbarnett  

Stop missing my videos and other news. Join my email list here: https://www.DavidCBarnettList.com   


#entrepreneurship #smallbiz #business #margin #grossprofit #financials #overhead

Wednesday, July 17, 2019

Small Business Struggles and Testing Markets



How to tell if a business is struggling AND how to test if there is a market for a business.

This week I answer two questions from Eric:

Can you tell if a business is having trouble just from a visit?

How can you test the market for a business?

I explain one of the signs I look for in a business that shows they’re short of cash.

The answer to the second is to make a sale before you invest in anything else.

Watch as I share some insights from my experience: https://youtu.be/-QQyx_F4RTg



Learn how to buy a successful business at https://www.BusinessBuyerAdvantage.com
Book a call with me at https://www.clarity.fm/davidbarnett  

Stop missing my videos and other news. Join my email list here: 

#entrepreneurship #smallbiz #business #market #sales #failure

Monday, July 15, 2019

Getting attorneys and CPAs to work for free

This is an email that I sent out recently to my subscribers.  If you'd like to receive emails every day from me with ideas, commentary and offers, please sign up over at https://www.DavidCBarnettList.com



Can you pass deal risk along to your service providers?
I was contacted the other day by a long-time friend in Florida who helps people buy businesses.
Why did he want to reach out to me?
To ask me a question: Do you have any direct experience with attorneys and accountants working on business acquisition files on a contingency basis?
I responded that I did not with the exception of a new lawyer that I knew of who did a deal when he was fresh out of college to try and build his practice.
You see, my friend is being flooded with comments and expectations of business buyers who believe that it is commonplace for CPAs and Lawyers to work on contingency.
What is contingency?
It means you only get paid when and if a deal is successful. 
So, for a CPA this means you only get paid for due-diligence work if the buyer completes the deal and everything and everybody else falls into place.
Like financing and if the due diligence doesn’t actually reveal any problems.
The place you find this kind of payment scheme quite often is with lawyers and personal injury.
Here’s the difference though: Lawyers can assess a case and judge for themselves if they feel that the plaintiff will be successful… and the defendant (insurance company) always has cash.
My friend asked a few people like me what we were seeing because he was beginning to doubt himself.
There are SO MANY PEOPLE who believe so strongly that if they just call THE RIGHT lawyer or CPA they can get them to work and only be paid if the deal works out.
Why is the idea that CPAs and attorneys will work on business acquisition deals on a contingency basis growing?
That’s an interesting question.
You see, the best qualified lawyers and accountants know their time is valuable and they have a bunch of people waiting to work with them. 
Why would they work with a business buyer and not be certain of getting paid?
Many deals are initiated that never work out.
So why would they agree to only get paid if the buyer makes everything work just right?
Why?
Can you think of a good reason?
Maybe for a higher fee?
Most good advisors are struggling to get home by 5pm. 
They don’t need more work and if there’s a chance that they won’t get paid, it wouldn’t make sense to do it.
The reason this idea is floating around the internet is because it is a little lie that helps to support a bigger lie.
If I tell you that you can buy a business with no money by following a magical formula, a smart person will likely think about the closing costs and due-diligence fees.
‘How do I pay the lawyer and accountant if I have no money?’ the smart student will ask.
‘Don’t worry my little Padawan, I am a Business Acquisition Jedi Master and I will show you how to get lawyers and accountants to gamble their fees on your success.’
Bam. Problem solved.  Now you really can buy a business with no money.
Except you can’t.
And this is what I’m running into more and more.
People who’ve invested $3,500, $5,000, $7,500, $12,000, $25,000 and more into ‘programs’ designed to show even the brokest of broke blokes how they can buy a big and successful business with no money even if they have bad credit.
Don’t believe the hype.
You need a great lawyer who is experienced in small business acquisition to help you with paperwork and legal due diligence.
You need a great CPA who is experienced in small business purchases to help you examine the numbers.
Neither of these team members will be free or will risk their time on whether you can learn to properly wield your newly minted business acquisition light saber.
Go talk to some businesspeople.
What was the consensus of my Florida friend who surveyed people in the industry?
Not one of them said they had seen a good lawyer or CPA do an acquisition deal on contingency.
So, is this impossible to pull off? Maybe not IMPOSSIBLE, but you’d likely have to leverage existing personal or business relationships to make it happen.  Is your brother a CPA or attorney?
Learn the real deal when it comes to buying a business over at https://www.BusinessBuyerAdvantage.com

Cheers

Dave

Wednesday, July 10, 2019

How hard is it to find comparable transaction data when buying a business?



It’s pretty easy.

You just open your wallet and pay to access a private transaction database.

BUT- then you have to know how to deal with the bits of data you’ll find in there.

AND- that’s the problem.

See what I say about the issues here: https://youtu.be/ANKKqemYCTs



Learn how to buy a successful business at https://www.BusinessBuyerAdvantage.com

Book a call with me at https://www.clarity.fm/davidbarnett  

Stop missing my videos and other news. Join my email list here: https://www.DavidCBarnettList.com   

#entrepreneurship #smallbiz #business #comparables #sampletx #buyabiz

Thursday, July 4, 2019

Can you stack those napkins as high as Carnegie's notes?

Carnegie’s Seller Notes

Happy 4th of July.

I thought I’d help my American friends celebrate Independence Day by relating a story about a famous American industrialist and how he sold his business entirely on a note… well, a whole stack of them.

Andrew Carnegie was born in Scotland and went to the US when he was 12 with his parents. (Barnett is a Scottish name too, FYI)

He was industrious and eventually became an investor, stock promoter and the owner of Carnegie Steel in Pittsburgh.

In 1901, JP Morgan (whose bank still bears his name) decided to roll up all the big American steel companies into one big company.

It was to be called US Steel.

He thought he could cut costs by eliminating duplication and reduce the price to consumers while raising wages and making it nearly impossible for anyone else to get into business.

Maybe it was the inspiration for the game Monopoly?

The sale price of Carnegie Steel was $303,450,000.

That would be USD$7.8 Billion dollars in 2019 money.

By the time of the sale, there were other share holders so Carnegie didn’t receive the entire amount. 

The purchase price for his shares was $225.64 million.

Now, here’s where the story gets interesting and where most people fall asleep or fail to grasp the significance…

He was paid entirely in $100,000 5%, 50-year gold bonds.

What does that mean?

It means he financed the entire sale and allowed JP Morgan to write him a cheque for 2.5% of the balance twice each year for 50 years with the original principle amount to be paid in 1951.

That’s a $5,600,000 cheque twice each year. No principle was paid down.

If the buyer failed to make that interest payment, or ‘coupon’ as it was called, they’d have to come up with enough gold to settle the debt.

At $20/oz, that would be 5,000 troy ounces of gold for each piece of paper. (US dollars were fixed to gold back then)

Since it was 1901, of course, all of these paper notes were delivered to the seller. 

Likely, they’d come by train because the bank that Carnegie used to store them had to build a special vault to house the pieces of paper.

That’s a lot of paper!

Carnegie would have been able to sell some of the bonds to diversify his wealth, but the fact remains… he financed the sale of his steel mill and then went on to become a great philanthropist.

Which means three things:
  1. You don’t necessarily need all the money saved up to buy a great business.
  2. It’s easier to be generous if you’ve enjoyed a life of business success.
  3. You can sell your business to someone who doesn’t have all the money if you believe they are the right person with the right plan.
Happy 4th of July.

To learn more about buying a business check out https://www.BusinessBuyerAdvantage.com

And to learn about selling your business, visit https://www.HowToSellMyOwnBusiness.com

Cheers! and don’t stand too close to me when you light those fireworks.
 

Dave

Wednesday, July 3, 2019

Big Loans for Small Businesses. Is 90% SBA financing a good idea?


Is borrowing 90% of the purchase price of a business a good idea?

Currently, American entrepreneurs are able to put only 5% down and borrow 90% from a bank and 5% from the seller to buy a business.

This is a lot of borrowing.  Otherwise known as leverage.

Is borrowing $19 for every $1 of your own money put into an acquisition a good idea?

Does it matter WHO you borrow money from?

I answer these questions and more from a viewer who worries about the risk of a big bank loan.

Check out the conversation here: https://youtu.be/-ocQGY2LuGE



Here is the video I mention about a 90% financing disaster: https://youtu.be/-CF-b7QdctQ



Learn how to buy a successful business at https://www.BusinessBuyerAdvantage.com

Book a call with me at https://www.clarity.fm/davidbarnett  

Stop missing my videos and other news. Join my email list here: 

#entrepreneurship #smallbiz #business #sba #financing #businessfinancing #businessloan