The ONE Thing The Guru's Don't Tell You About Buying Your First Business
Joe Nicolosi
?? BUSINESS FUNDING ?Working Capital , Purchase Order Financing, Accounts Receivables Financing ?? [email protected]
When the pandemic hit and many Small Businesses began conserving, M&A experts caqme out of the woodworks to sell programs on buying businesses. You would hear things like "There is no better time to by than now". While there are certainly some credible mentors in the Mergers and Acquisitions space, the ones who saw an opportunity to profit on the vulnerability of those new to the game, skyrocketed.
In the past year alone, I have received more requests from people looking to acquire their first business. During that process I have discovered a couple common denominators. One, most of them didn't have the financial strength to make it through underwriting. Two, If they didn't have the financial strength, they didn't have the networks of investors willingly to come with for a piece of equity.
No Matter what size business you are looking to acquire whether a $500,000 business or a $5,000,000 business, there is ONE thing you MUST come to terms with that most of these guru's don't harp on enough.
That one thing? YOU NEED SKIN IN THE GAME. Yes, it's true. Unless you're fortunate enough to have a family with deep pockets or know private investors who trust you- this is the reality for 90% of people looking to buy their first business.
I tell clients up front that they need to prepare for a 10% equity injection as we primarily use the SBA for acquisitions. The SBA takes a serious look at a guarantors financial strength, credit profile, and collateral.
In a scenario where a first time buyer wants to acquire a $500,000 business, he/she can expect to come to the table with $50,000 + closing costs. Having your funds in place is extremely crucial before going out and shopping for deals. If you don't have the funds yourself, find a way to secure them before diving into a purchase agreement with a seller or business broker. If you are not prepared it typically ends up to be a big time waste for all parties involved and people may not take you serious the next time you want to consider a deal.
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YOU NEED TO HAVE SKIN IN THE GAME.
If you have a business you're looking to buy and additional questions are popping up, feel free to reach out to me at [email protected]