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Should you make a lowball offer?

Lowball

Should you make a lowball offer on a business?



When buying a business is it a good idea to make a lowball offer? This is a critical question for many buyers. How should you frame your initial approach – a fair offer or start out low?

People will make a low offer for a number of reasons.

They don’t know what to pay –
Many times buyers are confused as to what they should pay for a business. Because they don’t know what to pay they play it safe by making a low offer.

They think this is how you do things –
Some buyers believe that starting out with a low is how business is done. They believe that they will meet the seller somewhere in the middle.

They receive bad advise –
Not knowing what to pay for a business, buyers often seek advice from those they think are knowledgeable. Sometimes this advice can be way off the mark.

It’s all they can afford –
This happens when buyers look at a listing which is more than they can truly afford. They hope to negotiate the price down to their price range.

They are looking to “steal” a business –
These buyers hope to acquire a business for a good deal less than its value.

A lowball offer will likely not be successful. Business owners view their business as a reflection of themselves. They have invested time and money, blood, sweat and tears to build it up. A low offer will often be perceived as an insult. In fact in the wake of a low offer I have had sellers tell me “I wouldn’t sell my business to that person at any price”.

Just recently I had a buyer interested in a niche type of business. It was the perfect fit for him and the type of business that does not come along very often. Against my advice his initial offer was 60% of the reasonable asking price. The seller was so offended that it did not matter when the buyer later raised his price. We were unable to reach agreement. The initial offer so offended the seller that he was in no mood to bargain.

If you find a business you want to buy the best approach is to do your research and calculate a fair offer. Many times the business is already priced fairly to begin with. A good deal of businesses will sell at list price. If you feel the price is fair then do not be afraid to pay it. Once you have determined the price you want to offer it’s OK to offer a little less to leave yourself some bargaining room.

Those who offer low thinking it will make the buyer come down more in price are usually in for a nasty surprise. In response to a low offer many sellers dig in their heels and refuse to budge. On the other hand if they perceive the offer as reasonable they will often respond in kind and try to find a happy middle ground. At the end of the day for a deal to work it has to be perceived as a win/win by all parties.

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Buy a Business In 2015

New Year
Buy a business

Let me help you make your dreams come true in 2015. As one of Florida’s top Business Brokers I can help you find the right business. There are five things you should know about my services.

One Broker
As a member of the Business Brokers of Florida I cooperated with over 1,000 active business brokers in this State. That means that when you work with me – you will have access to all their listings.

One Website
From my website you can search almost 4,000 business listings throughout the State of Florida. Click on this link to start now and remember to bookmark it

Experience
I have been a successful business broker for over eight years. I hold the prestigious designation of Board Certified Intermediary (BCI). Prior to becoming a business broker I ran a successful small business for many years. There is no one better equipped to assist you in your search.

Technology
I utilize the latest technology to allow you to start your search from the comfort of your home. Digital signing of Non Disclosure Agreements and other documents along with Web Meetings and Video Conferencing will cut out much of the time consuming leg work.

Network
I cooperate with a Network of professionals eager to help you in your search. Whatever advice you need I can recommend the right professional to assist you. Learn more View my collection of informational videos or read my blog. I look forward to helping you.

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Buying the perfect business

Perfection
Buying the perfect business.

How do you find the perfect business to buy? Well that’s a trick question. Because there are no perfect businesses. Like the people who create them businesses are imperfect. There are buyers who have spent many years looking for the perfect business. They become confused and disappointed when they don’t find it. One buyer recently told me “Every listing I have looked at has its negatives”. The fact is that if there is ever a perfect one out there, it will get snapped up before you have an opportunity to look at it. So save yourself the time and agony and try instead to find the business that is right for you.

When evaluating an opportunity use the time honored method of drawing a line down a sheet of paper. Itemize the pros on one side and the cons on the other. When your pros outweigh your cons you might have found the business you should buy.

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Buy a Business or Launch a Startup?

Open Sign

Open for Business


Is it better to buy an existing business or launch a startup? The answer may depend on your goals. However In general it is better to buy a business than to start one from scratch. The reasons are varied. First of all buyers often underestimate the true cost of establishing a business. Let’s take a simple retail business for example. Before opening the doors a buyer must

  • Find a location

  • Negotiate a lease

  • Pay for the buildout

  • Purchase furniture, fixtures and equipment

  • Purchase inventory, marketing and advertising material

  • Interview and hire employees

  • Establish vendor relationships

  • Obtain licenses and permits

  • Invest a considerable amount of their time and labor
  • (never free)

    Once open, the new business has to build a loyal customer base. Most startups don’t show a profit until year two or three. During this time the owner is supporting the business instead of the other way around. The total expense of getting to the point of success will typically be more than a buyer would have paid for a successful established business.

    Another reason to buy instead of startup is the high failure rates of new enterprises. Statistics show that by year four 50% of startups are no longer operating. Established businesses with a track record have a much lower failure rate.

    Buying a business gives you a functioning and profitable business from day one. You avoid the headaches of a startup but still have the ability to mould the business to your own personality. You are less likely to see your business fail and your investment lost.

    There are of course reasons to start up a business. If you have a unique idea and the funds to see it through you may need to build it from scratch. But in general it is better to take over after someone else has done the heavy lifting.

    Anthony John Rigney PA is a successful Business Broker. He works with business owners and buyers to accomplish a smooth transition of ownership. For more information call today 904-725-7677

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    The Instant Entrepreneur

    Have you dreamed of being your own boss? Do you wish you were the one making the big bucks and calling the shots instead of toiling away in cubicle hell? Maybe you have considered becoming an entrepreneur but figured it is too risky or that it will take too long to get a new business off the ground. Well there is a way to become an instant entrepreneur. All you have to do is buy an existing business. Yes it’s that simple.

    Experience shows that most new enterprises don’t make a profit during their first two years of operation. During that time the owner absorbs the cost of leasehold improvements, acquiring furniture, fixtures, tools and equipment. There are staff to be hired and trained. Marketing costs accumulate as the business attempts to establish its name in the marketplace.

    But it could be so much easier. Buy an existing business. Instead of the massive start up costs – you walk in the door and everything is in place. Don’t worry about hiring the right employees you already have them. Customers and vendors know where to find you.

    Don’t have quite enough money to buy a business? An existing business with a good track record and solid books may well qualify for a SBA loan with a small down payment. If it doesn’t then the seller may be willing to partially finance it for you. Still need money? Consider borrowing from yourself. ERISA rules allow you to invest your 401K retirement account in a business you start or buy.

    Close on your business purchase and you become an instant entrepreneur. From day one you have positive cash flow. The heavy lifting was done for you. Now all you have to do is reap the rewards. If you are ready to take the plunge call your local friendly business broker today. We are ready to help. Your future starts today!

    Anthony John Rigney PA is a Florida based Business Broker with Florida Business Exchange. Whether your goal is to buy a business or sell your business Anthony can help. Call today at 904-725-7677 for a free consultation.

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    Buying or selling a business is a complex process. Make sure you have the right team on your side. Contact us today!