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Buying a business?

thecoach

Contributor
Aug 29, 2007
125
24
23
Regina, SK, Canada
So I came across an opportunity to purchase a buy an established (been there for more than 20 years) investment and insurance (home, auto, life and health) business. My original plan was to stay where I currently am and build my practice from the bottom up, but now I have the opportunity to buy an extablished one and build on that.

The plan is that I would come on board with them for roughly 3 years and run the business with another partner under the current owners guidance, then after the 3 year period we would buy the business from them.

The problem is I've never bought a business before (only built my own small ones). I've tried searching on here and on RD but haven't found anything. What kind of questions should I be asking? Are there any good resources out there (books, websites, etc) where I could learn a little more about buying an existing business?
 

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nomadjanet

Contributor
Aug 28, 2007
310
54
26
TX
www.sba.gov/smallbusinessplanner/start/buyabusiness/index.html


www.allbusiness.com/buying-exiting-businesses/purchasing-a-business/4007-1.html


Google buying a business you will get lots of sites to choose from for info, some free some not. There are also lots of books written about the process a good place to find books is the library of a university in your area that has a large MBA program. You don't have to be a student to sit & read, only to check out; at least in our area. You can go & make notes of the things that strike you or even just to research which books would be worth seeking out.

We have only bought one existing business, it was not in our exact line of expertise and one of the things we did was join and go to some professional organizations associated with the line of business. We got lots of info & some benchmarks and things like that helped us find & structure the right deal. Afraid I can't help much with the financial end as we paid cash for all but the hard assets that could be financed through a regular equipment loan.

Good luck with your decision.

janet
 
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thecoach

Contributor
Aug 29, 2007
125
24
23
Regina, SK, Canada
Thanks Janet. This buy is a few years away so I've got lots of time to be a good student. :D
 

yveskleinsky

Bronze Contributor
Speedway Pass
Jul 26, 2007
2,233
496
192
42
We have only bought one existing business, it was not in our exact line of expertise and one of the things we did was join and go to some professional organizations associated with the line of business.
janet
Janet-

What made you decide to buy a business that wasn't in line with your expertise? How did it pan out? Knowing what you know now, would you do it again- or what would you do differently? ...Thanks for letting me pick your brain! :)
 

nomadjanet

Contributor
Aug 28, 2007
310
54
26
TX
Janet-

What made you decide to buy a business that wasn't in line with your expertise? How did it pan out? Knowing what you know now, would you do it again- or what would you do differently? ...Thanks for letting me pick your brain! :)

Well we bought a business that was related to what we do but not exactly in line. We owned a plumbing service business and we bought a septic service business. It does tie into our existing business but there were technicial issues & laws that we needed to be educated on in order to operate the business. We had a friend that owned this business and we had worked with him in refferals back & forth for several years. When he died unexpectedly his children gave the business to one of his employees. We were not able to keep the same type of working relationship with the new owners. We decided that this issue might be worth investigating as another aspect of business for us and we started working on the knowledge needed and shopping for a small business that wanted to close out. We took over the other business in 1997, I will say we did not expect the other business to be a huge revenue generator at first as they company was basing prices on the going rate & not the cost of doing business. We started making changes and cross marketing their client database with our client database. It has worked out well and we have gained sales in both divisions from the cross marketing.
The one thing that I think we would do differently is to start out with the vision of the big picture of the deal this would enable us to actually buy into the next phase of this business at the begining. Ten years ago we could have bought into the treatment phase for 10% of the cost of doing it now, we were to short sighted to see the big picture and now, if we want to go into that phase will will pay millions instead of a few hundred thousand.
That's why, when we go into the campground business I want to start out with the big picture of all the possible parts of the site that we may want to have. We may not set them all up at the begining, we may have to do the development in phases, but we want to have the consideration of the big picture right from the start. So my campground vision is not an RV park; it is a residential/resort community with RV slots, cabins, boat storage, marina, resturant, convienance store comunity center event center building.
Janet
Janet
 

yveskleinsky

Bronze Contributor
Speedway Pass
Jul 26, 2007
2,233
496
192
42
Really great play-by-play of how you go about having a vision and bringing it to life! ++rep.

I am going to start using that idea of thinking huge and then scaling it down to bite size chunks.

Thanks!:cheers:
 

china

New Contributor
Sep 27, 2007
95
9
27
Los Angeles, CA
So I came across an opportunity to purchase a buy an established (been there for more than 20 years) investment and insurance (home, auto, life and health) business. My original plan was to stay where I currently am and build my practice from the bottom up, but now I have the opportunity to buy an extablished one and build on that.

The plan is that I would come on board with them for roughly 3 years and run the business with another partner under the current owners guidance, then after the 3 year period we would buy the business from them.

The problem is I've never bought a business before (only built my own small ones). I've tried searching on here and on RD but haven't found anything. What kind of questions should I be asking? Are there any good resources out there (books, websites, etc) where I could learn a little more about buying an existing business?
I think buying an existing business is a great idea. Just guessing -- but since they have been in business for over 20 years, the owner is retiring and doesn't have kids to take it over? To me, this might be an ideal situation since you are dealing (hopefully) with a successful business and not one that has been run into the ground by someone who didn't know how to run it. (I know some would say it's better to buy one that hasn't been successful and turn it around -- but turn arounds take a long time and they aren't always successful.)

The fact the current owner is willing to train you for 3 years is a plus too.

You should ask to look at the books. You want to make sure you are buying a profitable business and that what you are paying is in line with what you should be paying.

Are you buying property (office building, etc.) with the business? Or are you taking on an existing lease? I'm assuming that an insurance business doesn't have any inventory, but you would get access to their insurance lines, etc.?

Is the part of the country you are in a growing area or a dying area? Or is it relatively stable?

There is a lot to consider but I know someone who bought a business from another person who was retiring and was hugely successful with it.
 
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thecoach

Contributor
Aug 29, 2007
125
24
23
Regina, SK, Canada
sorry...haven't been on here in a while...been sorting out this stuff...

To answer some of the questions China....
The owners are in their late 40s (I'm guessing). One has kids in their late teens, but they have no interest in business or the financial world (they are the artsy type). I haven't discussed their reasons for selling specifically with them, however, they've just mentioned off the cuff that they've been doing it for 20 years and it's time to move on. The one owner has eluded to the fact that he has had other business ventures that have paid off well for him, so I think it's just time for him to cash in his winnings and enjoy the money he has...AKA retire, as many financial people do around age 50. Like I'm sure most business owners are, I would assume he doesn't want to see somethign he put 20 years into burn to the ground when he's gone, hence the 3 year training period.

The location is in a stripmall right now (though there is talk of moving to a new location being contructed close by...see below), so I would assume they have a lease that I would be taking over. There really isn't any inventory aside form the clients, if you consider them inventory. Essentially, it is similar to a franchise that you don't pay for. Their legal name is Southside Financial (I think they said), however all the signage and marketing material is "Co-operators" branded. They are independent contractors promoting Co-operators products. I'm basically buying their practices with one another person (they have a person that is liscensed in property and casuality insurance, but has no interest in life and health insurance and investments...this business offers all those products).

The location is in a decent area of town and they have recently announced new residential and commerial contruction within 5 minutes of the location that is expected to be completed in the next 3-5 years, so the area hasn't really been growing lately, but has stayed consistant in it's standard of living (one of the better areas in town) and will be growing in the immediate future. The city itself and province for the most part are currently on the upswing side of an economic boom...it's been labelled as a bullish area in Canada from many sources.

Technically, I'm still in the application process for them to "hire" me on as an advisor first, so once they get past the qualifications part, I'm sure we'll get more into the taking over the biz talks.
 

Yankees338

Bronze Contributor
Jul 24, 2007
1,829
136
81
28
NJ/MD
sorry...haven't been on here in a while...been sorting out this stuff...

To answer some of the questions China....
The owners are in their late 40s (I'm guessing). One has kids in their late teens, but they have no interest in business or the financial world (they are the artsy type). I haven't discussed their reasons for selling specifically with them, however, they've just mentioned off the cuff that they've been doing it for 20 years and it's time to move on. The one owner has eluded to the fact that he has had other business ventures that have paid off well for him, so I think it's just time for him to cash in his winnings and enjoy the money he has...AKA retire, as many financial people do around age 50. Like I'm sure most business owners are, I would assume he doesn't want to see somethign he put 20 years into burn to the ground when he's gone, hence the 3 year training period.

The location is in a stripmall right now (though there is talk of moving to a new location being contructed close by...see below), so I would assume they have a lease that I would be taking over. There really isn't any inventory aside form the clients, if you consider them inventory. Essentially, it is similar to a franchise that you don't pay for. Their legal name is Southside Financial (I think they said), however all the signage and marketing material is "Co-operators" branded. They are independent contractors promoting Co-operators products. I'm basically buying their practices with one another person (they have a person that is liscensed in property and casuality insurance, but has no interest in life and health insurance and investments...this business offers all those products).

The location is in a decent area of town and they have recently announced new residential and commerial contruction within 5 minutes of the location that is expected to be completed in the next 3-5 years, so the area hasn't really been growing lately, but has stayed consistant in it's standard of living (one of the better areas in town) and will be growing in the immediate future. The city itself and province for the most part are currently on the upswing side of an economic boom...it's been labelled as a bullish area in Canada from many sources.

Technically, I'm still in the application process for them to "hire" me on as an advisor first, so once they get past the qualifications part, I'm sure we'll get more into the taking over the biz talks.
Given your positivity towards the future of the market you're in, have you considered perhaps purchasing a commercial space to work out of? You could purchase a single office building just for yourself, or a strip mall with a few other spaces you could rent out.

I don't know much about buying a business, but your deal doesn't raise any red-flags to me. I'd get to know a little more about the business and the guys before you commit to anything, but I'm sure that's nothing new to you. You seem to be familiar with the industry, but I would suggest talking to local firms to see if you could uncover anything that may help.

Good luck and keep us posted.
 
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thecoach

Contributor
Aug 29, 2007
125
24
23
Regina, SK, Canada
What I plan on doing is going for lunch or something with the other guy that will be the eventual partner with me (the property and casuality guy) and see what he knows. He's been working there for a little while now. I've tried to ask around about the place, but anyone that works at the Co-operators head office that I know doesn't know much about this location.

They have mentioned the possiblilty of moving this office to some of the new land that is being developed, so I would assume they would be doing that to own the property instead of having a lease.
 

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