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

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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. 

Want to buy a business? The seller needs to take you seriously...You need to make the first sale.

I've been e-mailing recently with a person trying to buy a business.  The sellers will not discuss terms and make demands that seem unreasonable.  What is the problem?  Watch...

Want to be properly prepared to buy a business?  Take my course at www.BusinessBuyerAdvantage.com 

Transcript:

Hey guys, it's Dave Barnett.  I just want to make a quick video because I was chatting online with someone who had seen a bunch of my videos and basically was expressing some frustration because they had been actually trying to buy a business.  I'll let you know the two things that seem to be happening to this person all the time.

Number one:  They were always been asked by sellers to put up a big deposit to demonstrate good faith in making the transaction and they were always been asked to provide very detailed financial information by the sellers and they said that they had tried to convince the sellers to do some vendor financing for them and they hadn't been successful at all in getting anyone to be able to even discuss it with them.

They were looking for some help.  Basically what I said to this person is, you are not being successful because you haven't made the first sale.  When someone goes to buy something like a car, or you go to Walmart to buy a blender or something; basically you're the customer and the other person who is trying to sell something, is trying to accommodate you, they are trying to make things happen for you so that you will buy their product.

The same thing doesn't happen when you go to buy a business because we need the sellers to be willing to help us out with training, financing most of the time and other sort of accommodations.  The first sale when you go to buy a business, it's not actually them selling you the business, it's you as a buyer selling them on the fact that you are the right person to buy the business, and that you are actually capable of doing it and you have the resources to do it.

In my online course, Business Buyer Advantage, I go on at length about this and how you properly prepare yourself in order to go out and meet those sellers, and what I said to this particular individual is that they actually were working against themselves because the sellers won't take them seriously.  They were failing in that first sale, so these people didn't believe that they were able to get the money together so they were asking for detailed financial information.  They didn't think that they had enough money to buy the business so they wanted a big deposit to show that they were serious and maybe they didn't believe that this person was capable of running the business so they dismissed the idea of vendor financing out of hand because they didn't want to take the risk on this particular buyer.

If you are going to go out and approach someone with the idea of inquiring as to whether or not you might be able to buy their business.  You need to get your act together first so that you are able to come up on that person and confidently argue your case for why you are the right person to run that business and why you have the resources and you are going to be successful and that in turn mitigate the risk they might take in mitigating the finance for you.

Anyone who is going to buy a business should take my business buyer course which is available at businessbuyeradvantage.com.  With respect to the initial preparation for going out there, I talk a lot in the course about the buyer resume and in fact in the follow-up program which is called the next step that people can take after a business buyer advantage, we actually go through an exercise of you creating a buyer resume to go out there and sort of break down these barriers and help you make that first sale, which is selling the business owner on the fact that you are the right person for the business and you are going to be able to pull this off.

Anyway, thank you guys and keep sending in your questions.  I love to get questions about local investing, buying and selling small businesses, personal finance etc.  

Thanks, we'll talk to you later.  Don't forget  to sign up for my e-mail list.

Hey, you made it to the end of the video, that's great.  Don't forget visit www.investlocalbook.com.  Sign up for my e-mail list, it's right down here, under the welcome video.

Thanks and we will see you next time.

The Invest Local Book blog is all about small business, franchises, local investing, home economics, small business systems and borrowing money for your business. It's full of great content and I look forward to seeing your feedback.  Sign up for my mailing list and don't miss a thing! [CLICK NOW]