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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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. 

Awful story of a couple trying to buy a business who wasted thousands of dollars. Don't make this mistake - David C Barnett

Don't be like this couple.  If you're going to buy a business (which is smarter than starting one) then you need to know what you're doing to avoid costly mistakes.  Watch: https://youtu.be/8lZ6i0jOgBQ

Transcript:

Oh hey guys, it’s Dave Barnett from DavidCBarnett.com. I wanted to take just a few moments here today to tell you an absolutely terrifying story about a couple who were trying to buy a business and it coincided perfectly with the fact that this video will be coming out on April 1st. Which is the day my new business buyer website is launching.

I was referred a couple who were trying to buy a business by someone in the audience actually. So this couple had found a business that was for sale and they wanted help analyzing the business to see if it was a good deal or as if it was priced realistically. They asked among others where could they find such answers and one of you out there referred them to me. Thank you.

I looked at the business with them, showed them why the business is worth about a quarter of the asking price. That’s right. The seller was asking four times more than the business was worth. And they quickly decided that this wasn’t for them and weren’t even going to try to negotiate a price to it because the seller was unreasonable.

I thought that was the end of the story but I had recently been speaking to them and have discovered that before they met with me, they had actually paid a fee to the seller in order to get the financial statements. So this is often referred to as ‘’Pay to Peek’’ and basically the way that it works is a person who has a business to sells is approached, the buyer says, ‘I want to buy your business’.  The seller says, 'You want my information, it is confidential. I want you to put non-refundable money upfront to show me that you are serious before I show you my financial statements.'

So this is kind of like a real estate agent saying ‘Hey you might like to buy this house, but if you want to look inside you have to pay me a hundred dollars’’ and it is absolutely insane. No one should ever do this. But this couple did not know that. In fact they went directly to their lawyer and they asked their lawyer if this was a real, legitimate and normal thing to do. Their lawyer said that it was! Their lawyer also said that they needed a proper NDA and they needed a proper contract that would support that this money was actually a deposit toward an eventual purchase.  The lawyer did the paper work and then charged them a fee as well.

When I heard this story I quickly searched the Internet and I discovered that their lawyer is actually a very well known lawyer in the fields of immigration and real estate. Not in the field of business or business brokerage or helping people buy businesses.

Here’s the thing, I saw a really great quote the other day. It had been about real estate investing but it applies just as equally to buying a business and I believe the quote was something like ‘ In real estate investing you’re going to pay for your education one way or another. You either pay for someone to teach you how to do it or you pay through costly mistakes.’ In this case, this couple literally paid thousands of dollars to learn that you should never give money or a non-refundable deposit before you’re allowed to look at the financials of the business.

Now, if instead of spending that money they had done my course Business Buyer Advantage they would have learned about 500 things that you need to know to buy a business. One of which is how to hire the proper professionals to help you. So they would have learned that their lawyer was not a lawyer to help them in these circumstances. That’s number one.

Number two, they would have learned not to give someone a non-refundable deposit before you get the chance to look at the business financials. Looking at a business is basically looking at financials, because that’s what a business is. It is an economic engine with sales and expenses and hopefully profit at the end. Without seeing that, you’re not able to examine the business. You can’t just go and look at the four walls and say that this business is something you want to buy.

April first is a big day because my new Business Buyer Advantage is going online, the website goes live that walks people through the three steps of my buyer program. It is also the day that my 21 Stupid Things That People do When Trying to Buy a Business, special report is live and available for sale. You can get that from Amazon or from my website DavidCBarnett.com. As well, I’ve got 3 things that have been released today April first for people trying to sell a business have gone live and I will talk to you about that more in next week’s video. If you want to take a peek and look ahead you can always check out the website DavidCBarnett.com.

Thanks and we’ll see you next time. Don’t forget to subscribe, like, follow and share so you can help bring my information to others.

Why not come over to my blog site InvestLocalBook.com where you can see all my latest’s posts and videos. You can also take the time to watch my welcome video, see what I’m all about and if you wish sign up for my email list. I only send 1 email each week. You get to choose which topics you’re interested in so that you only get information that you want to learn about it’s easy to unsubscribe anytime. Click my free resources link and have access to all my free eBooks, audiobooks and other PDF downloads. Thanks and we’ll see you next time.

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