Should You Become a Business Owner?

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While being a business owner may in the end not be for everyone, there is no denying the great rewards that come to business owners. So should you buy a business of your own? Let’s take a moment and outline the diverse benefits of owning a business and help you decide whether or not this path is right for you.

Do You Want More Control?

A key reason that so many business savvy people opt for owning a business is that it offers a high level of control. In particular, business owners are in control of their own destiny. If you have ever wished that you had more control over your life and decisions, then owning a business or franchise may be for you.

Owning a business allows you to chart your own course. You can hire employees to reduce your workload once the business is successful and, in the process, free up time to spend doing whatever you like. This is something that you can never hope to achieve working for someone else; after all, you can’t outsource a job.

Keep in mind that when you own a business or franchise, you never have to worry about being downsized or having your job outsourced. You also don’t have to worry about asking for a raise. No doubt business owners do have to contend with market forces and unexpected turns. But even considering those factors, business owners clearly enjoy a greater level of control over their destiny.

Are You Willing to Forgo Benefits?

As an employee, you’ll usually be able to count on a regular income and even allowances for sick days and vacation days. However, business owners lose money if they are sick or take a vacation. Plus, they won’t necessary have the steady salary that employees receive as they could see their income vary from one month to the next.

Do You Want to Grow Your Income?

Business owners have the potential to grow their income and take a range of proactive steps that lead to income growth. As an employee, your fate is far different. Employees usually exercise either minimal or no control over the course of a business and have no say in key decisions that impact its growth and stability. Being a business owner by contrast allows you to seize that control.

The amount of income made by business owners varies widely depending on everything from the industry to the region. But statistics show that the longer you own your business the more you’ll make. In fact, those who have owned their businesses for greater than 10 years tend to earn upwards of 6 figures per year.

One of the best ways to determine whether or not being a business owner is right for you is to work with a business broker. A broker understands everything that goes into owning a business and can help you determine whether or not you have the mindset to set out on the path towards business ownership.

Copyright: Business Brokerage Press, Inc.

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Three Overlooked Areas to Investigate Before Buying

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Before you jump in and buy any business, you’ll want to do your due diligence. Buying a business is no time to make assumptions or simply wing it. The only prudent course is to carefully investigate any business before buying, as the consequences of not doing so can in fact be rather dire. Let’s take a quick look at the three top overlooked areas to investigate before signing on the dotted line and buying a business.

1. Retirement Plans

Many buyers forget all about retirement plans when investigating a business prior to purchase. However, a failure to examine what regulations have been put into place could spell out disaster. For this reason, you’ll want to make certain that the business’s qualified and non-qualified retirement plans are up to date with the Department of Labor. There can be many surprises when you buy a business, but this is one you want to avoid.

2. 1099’s and W-2’s

Just as many prospective buyers fail to investigate the retirement plan of a business, the same is often true concerning 1099’s and W-2’s. In short, you’ll want to be sure that if 1099’s have been given out instead of W-2’s that it has been always done within existing IRS parameters. There is no reason to buy a business only to discover a headache with the IRS.

And speaking of employees, does the business you are interested in buying have employee handbooks? If so, you’ll want to make sure you review it carefully.

3. All Legal Documents

The simple fact is that you never want the business you are interested in buying to have its corporate veil pierced once you take over. You should carefully review all trademarks, copyrights and other areas of intellectual property to be sure that everything is completely in order. You’ll want to obtain copies of all consulting agreements, documents involving inventions as well as intellectual property assignments.

Everything should be protected and on legally sound footing. If you see any problems in this category you should run for the hills and find another business to buy.

Protect Yourself from a Potential Lifetime of Regret

Evaluating overlooked areas is essential in protecting your investment. For most people, the purchase of a business is the largest of his or her lifetime. It leaves little room for error.

Not only is it vital to investigate the major areas, but it is also essential to explore the smaller details. However, the truth of the matter is that when you’re buying a business there are no “small details.” No one realizes this fact more so than business brokers. Business brokers are experts in what it takes to buy and sell businesses. Working with a business broker is a significant move in the right direction. The time you invest in properly exploring and evaluating a business is time well spent and may literally save you from a lifetime of regret.

Copyright: Business Brokerage Press, Inc.

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5 Tips for Buyers of International Businesses

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The decision to buy an international business is no doubt quite serious. There are numerous factors that must be taken into consideration when deciding whether or not an international business purchase is the right move. Let’s take a closer look.

Tip #1 – Relocating Vs. Hiring a Manager

Buying an international business can also mean a substantial life change. Before jumping into the process, it is critical that you know whether you will be relocating or hiring a manager to run your newly acquired business.

Obviously, owning a business is a substantial responsibility and you’ll want to ensure that you know exactly what is going on with your new acquisition. Sometimes that means actually being there. The bottom line is that you will either have to relocate or hire a manager.

Tip #2 – Regulations

Understanding regulations, taxes and customs are another must for buyers of international businesses. A failure to factor in these elements can literally undo one’s business or at the very least place you at a competitive disadvantage. The time and money you invest in learning how regulations, taxes and customs work in this new territory is time and money well spent.

Tip #3 – Research Similar Businesses

You will want to invest your time into research. In particular, you will want to research similar businesses that already exist in the place where you are investing. Why are those businesses successful? What could you do to improve on their model or approach? Don’t assume that just because you know how businesses fare in the United States that this knowledge will always translate over to other countries.

Tip #4 – Be Aware of Potential Cultural Differences

It is important to be aware of cultural differences during the negotiation process, but this is really just the beginning. Cultural differences do not end once the negotiation process is over. They have ramifications in areas including everything from dealing with your staff and vendors to getting professional assistance from people such as local accountants and lawyers. You will need to be aware of cultural differences and perhaps even learn to speak the language if you want your business to be a thriving success.

Tip #5 – Hire a Business Broker

Business brokers are experts in buying and selling all kinds of businesses and that includes international businesses. There are many layers to owning an international business and business brokers can help you navigate the waters. The sizable expertise that a business broker brings to the table can help save you considerable amount of frustration and confusion.

These five tips are invaluable for helping you determine whether you should opt for an international business and/or how to proceed once you’ve decided to move forward. There can be big opportunities in owning an international business, but it is critical to proceed with a clear cut strategy.

Copyright: Business Brokerage Press, Inc.

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5 Reasons Buying a Business is Preferable to Starting a New One

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If you are considering running your own business, one of the first questions that might pop in your mind is: should I start a new one or buy an established business. In this article, we’ll take a closer look at the age-old dilemma of buying an existing business verses starting a new one from scratch.

1. An Established Concept

The benefits of buying an established business are no doubt huge. At the top of the list is that an existing business will have an established concept. Starting a business from scratch means taking a big risk in the form of a new idea. Will it really work? If the business fails, why did it fail? Both of these stressful questions need not be asked when you buy. An established business, especially one that has been around for years, has already shown that the concept and all the variables that go into it do, in fact, work.

2. Proven Cash Flow

Another massive benefit of buying an existing business is that an existing business has proven cash flow. You can look at the books and, in the process, determine just how much money is flowing in and out. With a new business, you simply won’t be sure how much it will generate. This can make it tricky when you’re trying to figure out how to not only pay your business expenses, but your personal ones as well.

3. The Unproven Element

No matter how good your idea and/or your location, your new business is still unproven. Despite the best of efforts, there may be an unforeseen variable that you or your consultants might have missed. However, when you opt for a proven, existing business, this variable does not apply to you.

4. An Established Staff

A business is often only as good as the people that populate and support it. Starting up your own business means that you have to go out and find all of your own employees. This process is much more than sifting through resumes. A resume only reveals so much. A resume doesn’t reveal if a candidate will be a good fit for the business, and it certainly doesn’t factor in chemistry. As any good coach of any team sport knows, chemistry is one of the greatest factors in winning a championship.

5. Established Relationships

A proven business also comes with an array of business relationships. Working out problems with your supply chain in the early days of your business can mean the end of that business. Many business owners have seen their businesses undone by problems with their supply chains. An existing business can point the way to reliable and consistent suppliers. When buying an existing business, you are acquiring a proven performer. You know that the business had what it takes to provide cash flow over a given period of time. You will also have customers who know who you are, where you are and how to buy from you. Buying an existing business also means gaining access to reliable suppliers and enjoying all the benefits that come with an established brand name and location.

A Buyer’s Quandary

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Statistics reveal that out of about 15 would-be business buyers, only one will actually buy a business. It is important that potential sellers be knowledgeable on what buyers go through to actually become business owners. This is especially true for those who have started their own business or have forgotten what they went thorough prior to buying their business.

If a prospective business buyer is employed, he or she has to make the decision to leave that job and go into business for and by himself. There is also the financial commitment necessary to actually invest in a business and any subsequent loans that are a result of the purchase. The new owner will likely need to execute a lease or assume an existing one, which is another financial commitment. These financial obligations are almost always guaranteed personally by the new owner.

The prospective business owner must also be willing to make that “leap of faith” that is so necessary to becoming a business owner. There is also the matter of family and personal responsibilities. Business ownership, aside from being a large financial consideration, is very time consuming, especially for the new business owner.

All of these factors have to be weighed very carefully by anyone that is considering business ownership. Buyers should think carefully about the risks – and the rewards. Sellers should also put themselves in a buyer’s position. The services of a professional business broker or intermediary can help determine the relative pros and cons of the transaction.

Options for Retirees to Finance the Purchase of a Franchise

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Author: Vasilis Georgiou, CBI, M&AMI, CBB, MBA, CIRM

President, CrossRoads Business Brokers, Inc./ Franchise Consultant with FranChoice

There is an interesting trend in the franchising world where more and more retirees are showing increasing activity in buying franchises. The economic and work environment realities after the economic crisis, have forced many folks of the baby boomer generation to take matters into their own hands, so to speak. They are looking for ways to be masters of their own destiny through business ownership, but they want to do it in a measured, deliberate way that minimizes the risk as much as possible.

Starting a business is inherently risky, and there isn’t such a thing as complete certainty of success. For a retiree or a baby boomer, that gives even more reasons for a pause for thought because time is not a luxury they can afford. That is why many are turning to the franchising model of business ownership where not only they can have access to well-publicized and regulated information about the performance of the system as a whole, but also have the opportunity to validate first-hand through interactions with existing franchisees.

Once a decision is made to buy a franchise that best fits individual aspirations, skills, and talents the question comes up as to the best financing approach that leverages existing assets, and does not deplete all capital, just in case it will be needed to sustain a longer launch effort. Many options exist, and the purpose of this article is to highlight them:

1. Retirement Funds and/or Savings
One inherent advantage retirees typically have is that after many years in various careers in industry, they have been able to accumulate some amount of retirement funds. There is a way for retirees to use these retirement funds to finance a franchise (or any business), tax free. Whereas in traditional borrowing you have to go through a rigorous and lengthy application process, leveraging retirement funds is typically faster and more straightforward. There are some benefits in this approach compared to other available options (Always consult with an accountant and a lawyer to ensure that your financial transaction is in complete compliance with law provisions):

  • Limits debt and enhances cash flow in the critical start-up phase of the business. Thus, resulting in a better chance your business will break even faster, and generate profits sooner
  • Low fees
  • As your business gains momentum and grows, your IRA will grow as well. Best part about it, it will grow tax free
  • More flexibility in case traditional borrowing needs to be in the mix for a larger investment. Funds may be used as the personal equity injection for SBA or conventional loans
  • Utilizing these funds to capitalize your business allows you to invest in yourself
  • Allows for tax-deferred retirement savings options in the future
  • Begin paying yourself a salary during the start-up phase

This is how it works: One specific law, The Employee Retirement Income Security Act(ERISA), allows a variety of retirement savings accounts to be utilized as a vehicle for investing in various options, including buying a franchise. The chosen corporate vehicle is a “C corporation which you have to form, which then can be eligible to create its own 401k program. You can roll over (tax free) existing retirement funds into your new corporation’s 401(k) program. The new corporation’s 401(k) program can invest in the stock of the new “C” corporation which can then use the proceeds to buy the franchise. You can only use the funds in your 401(k) account after you leave the company where it originated.

2. *Small Business Administration (SBA)
There are several types of loans available through the SBA. The most commonly used for the purchase of a franchise is as follows:

  • General Small Business Loans: 7(a)
  • Real Estate and Equipment Loans: CDC/504

As described on the SBA website (www.SBA.gov), the 7(a) Loan Program, which is the SBA’s most common loan program, provides loans to businesses with requirements of eligibility based on specific aspects of the business and its principals. In other words, the key factors of eligibility are based on what the business does to receive its income, the qualifications and backgrounds of its owners, as well as where the business operates.

On the other hand, a 504 loan could be suitable for franchises that involve retail locations, or investment in equipment and machinery. Specifically, a 504 program can be used for:

  • The purchase of land, including existing buildings
  • The purchase of improvements, including grading, street improvements, utilities, parking lots and landscaping
  • The construction of new facilities or modernizing, renovating or converting existing facilities
  • The purchase of long-term machinery and equipment

A 504 loan cannot be used for:

  • Working capital or inventory
  • Consolidating, repaying or refinancing debt
  • Speculation or investment in rental real estate

The SBA generally does not specify what businesses are eligible. Rather, the agency outlines what businesses are not eligible. However, there are some universally applicable requirements. To be eligible for assistance, businesses must:

  • Operate for profit
  • Be small, as defined by the SBA
  • Be engaged in, or propose to do business in, the United States or its possessions
  • Have reasonable invested equity
  • Use alternative financial resources, including personal assets, before seeking financial assistance
  • Be able to demonstrate a need for the loan proceeds
  • Use the funds for a sound business purpose
  • Not be delinquent on any existing debt obligations to the U.S. government

*Source: www.SBA.gov

3. Securities-Backed Financing
Another inherent advantage retirees typically have in funding a new franchise is that after many years in active investing, they have been able to accumulate some amount of stocks and bonds. They are then able to utilize qualified securities (i.e. stocks, bonds, mutual funds, U.S. Treasuries) to obtain a low interest line of credit.

There are advantages to using securities instead of traditional borrowing:

  • Pay interest only on the amount used
  • Loan-to-Value of Approved Assets from 70%-90%
  • Get working capital to start or expand your business
  • Supplement other capitalization plans
  • Not credit or income based

4. Home Equity
The housing market has recovered well recently from the worst downturn in recent years. A home equity line of credit (HELOC) can be used to fund a new business venture. You should carefully check interest rates and repayment terms.

5. Family and Friends
That is always a tricky approach. There is natural hesitation to mix family and friends with business. What if the whole franchise thing doesn’t go well? Where is that going to do to the relationship? Those concerns are well justified. However, transparency and well written Agreements that spell out the financial and operational responsibilities of each investor, together with a clear disclaimer of the risks associated with new ventures, can mitigate some of the downside to leveraging this kind of resource.

6. Franchisor
Franchisors want to enable new franchisees to start a location. Especially if the franchisee candidate is qualified and shows promise of success. After all, franchisors have a long term royalty incentive in placing good franchisees in the system even if they take less cash up front, and have to finance some of the cost. They look at it as a win-win. The royalty annuity can be substantially more in the long term. That is why some franchisors offer programs that partially finance the upfront fees, especially if equipment assets are involved.

Read Article at: https://www.bizquest.com/resource/options_for_retirees_to_finance_the_purchase_of_a_-317.html

Looking for the Thrill Factor in a Franchise

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The role of excitement in choosing the franchise that is right for you

Author: Vasilis Georgiou, CBI, M&AMI, CBB, MBA, CIRM

President, CrossRoads Business Brokers, Inc./ Franchise Consultant with FranChoice

One common objection that I come across when I consult with Candidates who are looking for a franchise to get into, has to do with the thrill factor as a selection criteria. In other words, Candidates often want their top choice for a franchise to be the one that “jumps out”, the one that gets them “excited”.

That is often a very misleading way to go about finding the franchise that is just right for you, the Candidate. A franchise opportunity can be very exciting, with products or services that feel “right” to your temperament and personality. It can even present extremely well when you go through the normal discovery cycle. Even if that is true, it can still be the wrong choice for you when you factor in the geographical area you will operate in, the demographic composition of that area, the competition and saturation factors, and the sustainability of the product or service offering in the long term.

As I covered in another recent article, “Buying a Franchise: It’s all about you“, buying the right franchise is not about how much you like its product or service and is not about being first to market in your geography. It is also not about following the hottest trend based on the latest statistic, choosing the franchise with the best track record, or even about following someone else’s lead who was successful doing it. It’s about finding a business that fits your skills, lifestyle, and goals & objectives. It’s about reducing business risk by matching your skills and abilities to the optimum franchise opportunity for YOU, which would result in the best long term success.

At the end of the day, it’s about whether you can convert your investment into a cash flow you can be happy with. Believe me, the thrill and excitement of getting into a franchise that gets your heart pumping really hard can quickly turn into an anxiety attack when you suddenly realize that paying customers are not as willing to share that enthusiasm.

Read the full article at: https://www.bizquest.com/franchise-for-sale/articles/Looking-For-The-Thrill-Factor-In-A-Franchise/

The Semi-Absentee Franchise Owner: Myth or Reality

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When owning a franchise doesn’t need to come at the cost of your current job

Author: Vasilis Georgiou CBI, M&AMI, CBB, MBA, CIRM

President of CrossRoads Business Brokers, Inc./Franchise Consultant at FranChoice

Leaving behind the relative certainty of a corporate job that offers income security, health benefits, and 401K matching contributions is a very hard decision. There is real risk in putting your livelihood on the line. But what if there is a way to do both? What if there was a way to pursue your entrepreneurial dream of building a business as an asset that you control, while maintaining your current cash flow via a job.

The answer lies in the franchise business model. In the article “Buying a Franchise: It’s all about you” I wrote on 1/17/14 on Bizquest.com, I identified various business categories and their characteristics. More so than the other business categories, two particular business categories lend themselves to a semi-absentee approach: Retail and Sophisticated Retail.

Read Full Article at: https://www.findafranchise.com/articles/The-Semi-Absentee-Franchise-Owner-Myth-Or-Reality/

Calculated Risk: Becoming a Franchise Entrepreneur

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Author: Vasilis Georgiou CBI, M&AMI, CBB, MBA, CIRM

President of CrossRoads Business Brokers, Inc./Franchise Consultant at FranChoice

Becoming an entrepreneur is probably one of the most nerve-wracking endeavors any of us can undertake. Especially if it means leaving behind the relative certainty of a Corporate job that offers a regular paycheck, health benefits, and even that wonderful 401K matching contribution.

The fear of taking the leap into entrepreneurship is natural. There is real risk in putting your livelihood on the line, especially when you have family members depended on you to provide for their future. It is that step into the unknown that causes that fear, and it is the aversion to failure that fuels it. Yet, most of the wealth in America is not inherited wealth. It’s wealth built by folks who have taken that leap, who have believed that they can be their own boss, and in the process, have reinvented themselves by taking control of their destiny and going places they never imagined possible.

There is a countermeasure to that fear, and it has to do with 4 key elements: Self-awareness, Fact-finding, Preparation, Validation.
Read full article at: https://www.findafranchise.com/articles/Calculated-Risk-Becoming-A-Franchise-Entrepreneur

Job Seekers and Franchise Options

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Why buying a franchise can be a career choice

Author: Vasilis Georgiou, CBI, M&AMI, CBB, MBA, CIRM

President, CrossRoads Business Brokers, Inc./ Franchise Consultant with FranChoice

In our professional life, we really have 3 choices when it comes to making a living. Each option has its advantages and challenges:

Staying the course with a job
Staying in a job may provide the security of a paycheck, benefits, and that 401K matching contribution. But there is never real security, and at the end of the day you are building wealth for the company, not yourself.

Go it alone as an entrepreneur
Becoming an entrepreneur is liberating. You get to come up with your own idea and act on it. Be your own boss. Have control. Biggest challenge: coming up with that original idea and then finding the capital, the systems/processes, and the people to execute. While you are embedded day to day in making it grow, you also have to worry about the big picture strategy, and staying a step ahead of the competition.

Partner with success through a franchise
The biggest advantage in going with a franchise is that the Franchisor has teams of people that already developed the system and processes necessary for execution, as well as the high level strategy and direction that needs to be continuously refined. You also have a verifiable model that has been put in use successfully before. Biggest challenge: Thinking that a Franchisor will do everything for you. You still have to make it happen at the local level.

Read the full article at: https://www.bizquest.com/franchise-for-sale/articles/Job-Seekers-And-Franchise-Options/