Business Broker
Entrepreneurs have three options on how to start a business
(a) starting their own business from scratch,
(b) buying a franchise business, or
(c) buying an established business for sale (either franchised or non-franchised).
The cheapest approach appears to be (a) because the start up costs may be the least. In the case of a service business, or contractor-based business, this may be true. If the business was heavy in assets, like manufacturing, or if it takes a long time to develop a customer base or sales cycle, the start up costs can accumulate while trying to create revenue. It may take 2-3 years before some businesses become profitable in this model, based on the investment. Depending on the business, the risk can be fairly high as well. Many businesses fail in the first 2 years and businesses created from scratch often fail at a higher rate than others.
The next most attractive option, at least to a first time business owner, may be to buy a franchise. The franchise company may have, not always though, name brand recognition to bring in customers faster than a local non-franchise start up. Investment into a franchise can be rather large. In addition to the franchise fee, you may need to build a building, or build out a leased space, according the franchise specs. You may take you 6-18 months from the time you sign the franchise agreement and pay your franchise fee to the day you open the doors for business. You're still in the red. You may get to breakeven faster with a franchise, but you have a long time period of expenses without creating revenue during the start up phase.
The third option is to buy an existing business. First timers may still prefer a franchise because of the systems and mentoring available from the franchiser. There is often a transfer fee. Depending on the franchise, it could range from $5,000 to $100's of thousands. A standalone established business would avoid the transfer fee associated with a franchise and would also avoid the ongoing royalty and marketing fees with a franchise. An established business should already be profitable and have an existing customer base. Some may have monthly reoccurring revenue while other may need to acquire every new customer individually with no repeat business. Some may be business to consumer (B2C) and others would be business to business (B2B). The cost for acquiring an existing business may initially appear to be the highest. However, the SBA will guarantee the loan needed to acquire a proven business with continuous revenue. A buyer can calculate the debt service going forward and estimate actual net income based on the past performance of the business.
Businesses under $100,000 income may be found in the classifieds, online, or even craigslist. Businesses between $100,000 and $5 million often are offered through business brokers. Business brokers are like real estate brokers, except they sell businesses instead of houses. Good business brokers should have a business background, either at a C-level or as a previous business owner themselves. Look for brokers with business experience that can answer your questions about the sales and/or acquisition process. In most cases, the business broker fees are paid for by the seller. Most brokers are local or regional in nature. Many will cover certain states. Others may specialize in a particular niche, but not be bound geographically.
(a) starting their own business from scratch,
(b) buying a franchise business, or
(c) buying an established business for sale (either franchised or non-franchised).
The cheapest approach appears to be (a) because the start up costs may be the least. In the case of a service business, or contractor-based business, this may be true. If the business was heavy in assets, like manufacturing, or if it takes a long time to develop a customer base or sales cycle, the start up costs can accumulate while trying to create revenue. It may take 2-3 years before some businesses become profitable in this model, based on the investment. Depending on the business, the risk can be fairly high as well. Many businesses fail in the first 2 years and businesses created from scratch often fail at a higher rate than others.
The next most attractive option, at least to a first time business owner, may be to buy a franchise. The franchise company may have, not always though, name brand recognition to bring in customers faster than a local non-franchise start up. Investment into a franchise can be rather large. In addition to the franchise fee, you may need to build a building, or build out a leased space, according the franchise specs. You may take you 6-18 months from the time you sign the franchise agreement and pay your franchise fee to the day you open the doors for business. You're still in the red. You may get to breakeven faster with a franchise, but you have a long time period of expenses without creating revenue during the start up phase.
The third option is to buy an existing business. First timers may still prefer a franchise because of the systems and mentoring available from the franchiser. There is often a transfer fee. Depending on the franchise, it could range from $5,000 to $100's of thousands. A standalone established business would avoid the transfer fee associated with a franchise and would also avoid the ongoing royalty and marketing fees with a franchise. An established business should already be profitable and have an existing customer base. Some may have monthly reoccurring revenue while other may need to acquire every new customer individually with no repeat business. Some may be business to consumer (B2C) and others would be business to business (B2B). The cost for acquiring an existing business may initially appear to be the highest. However, the SBA will guarantee the loan needed to acquire a proven business with continuous revenue. A buyer can calculate the debt service going forward and estimate actual net income based on the past performance of the business.
Businesses under $100,000 income may be found in the classifieds, online, or even craigslist. Businesses between $100,000 and $5 million often are offered through business brokers. Business brokers are like real estate brokers, except they sell businesses instead of houses. Good business brokers should have a business background, either at a C-level or as a previous business owner themselves. Look for brokers with business experience that can answer your questions about the sales and/or acquisition process. In most cases, the business broker fees are paid for by the seller. Most brokers are local or regional in nature. Many will cover certain states. Others may specialize in a particular niche, but not be bound geographically.
If you're looking for a business broker near Indianapolis, we would recommend Indianapolis Business Brokers.
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