Profitable Spa Company, Excellent Fundamentals
The Top Three Fears of Business-buying
(And how this business measures up against them)
What are the three top fears of someone looking for a business to buy? Yes, fears! We’re talking about investing hundreds of thousands of dollars here, and a lot of personal time and energy over the next several years. One should be afraid, and careful. Very careful.
As you may have noticed, online business-for-sale ads are not always, shall we say, “reliable.” And that leads us to Fear Number One: “Is this business really solid?” That is, is it really a profitable business with a good track record, one in which the owner actually gets cash flow like any other investment?
Or, as is often the case, is it simply a disguised occupation? Many offerings are really just jobs in disguise, for which the seller is asking a multiple of alleged profits. After adjusting out for the owner’s 40 hours a week (more likely 50 or 60 hours), there is really nothing left as a return on investment.
And by “solid”, one wants to know the revenue trend, say over the past three years. Here’s where the internal financials tell the story; is the top-line revenue stable, going up, or down? A downward trend likely means there is a serious problem lurking somewhere, and the owner may be looking to bail out (at your expense.)
The same goes for the other basic accounting categories: Cost of Goods Sold, Operating Expenses, Net Profit, and actual “take-home” Cash Flow after legitimate adjustments for owner benefits (and after negative adjustments for any unpaid owner contributions, like the 40 hours—sorry, I mean 60 hours—of unpaid labor.) What are the trends?
The same goes for the real estate: is it being accounted for at fair market value, separately from the business? Is the business supporting the purchase of the real estate at a fair market value lease rate?
A good broker will share all of this information openly, looking to give the prospective buyer enough information to quickly know if there is a potential fit.
How about Fear Number Two? That is, what kind of support can I expect after the closing? After all, I don’t know the business the way the owner does, and I will need some help as I get used to the business. Here again, my entire investment is at stake; I need the inside scoop about how the business really operates. If there is no support, then why would I just jump in and hope I can figure it out? The best offerings have significant post-closing support (from the owner/seller, and often from vendors.
On the same note, it helps when there are some employees that know what they’re doing. We will want to know that they will be staying on.
OK, this is an ad, not a How-To Book on buying a business. Let’s get on with Fear Number Three. What are the underlying fundamentals of the business? Is there really strong demand for the products and services? Is it likely to grow—or not? The best historical performance is “no guarantee of future results” as the saying goes. We had better look at the customer profile: who is buying what, and why? Can we realistically expect that to continue?
Now for the Ad Copy; here we go. Given the foregoing description of the Three Main Fears, it’s pretty easy to write.
1) Solid Business? Check.
Over 20 years of successful operation. Real cash flows after real adjustments for owner functions. Top-quality products and services (5-star Google review ranking.) Impeccable building and showroom. The only reason this business is on the market is that the owners are retiring. This is their retirement fund.
Can it be forced out by a landlord with his/her own future agenda? No, the real estate is offered right along with the business. Essentially, the business is buying the real estate for the new owner, via a fair market value lease allowance in the purchase prices (i.e., business and real estate.) The superb location is very much a part of the value here, and we would not want to have it jeopardized by some change in strategy by an outside property owner. In this case, the real estate is offered right along with the business, so the buyer can control the future growth without concern for ever being forced out.
It doesn’t hurt that the real estate provides additional collateral comfort for a lender, in case you are thinking about financing this acquisition.
2) Post-closing Support? Check.
The owners will commit to a significant period of personal one-on-one support, followed by a lengthy period of online/phone support. In addition, there is an unusual level of support offered by the primary vendor (a company with branches in 70 countries, and a regional manager in Portland.)
This company offers the type of training and ongoing support usually provided by only the best franchise operations. By the way, many of those franchise operations charge a percentage of revenue that can rapidly convert a business into an occupation. This one doesn’t. They just help, whenever you need it. And they too offer training that will give you the comfort you legitimately want, so you know you will be able to run the business and produce the kind of profits the present owner has been enjoying.
3) Strong Fundamentals? Check.
Is there anyone who hasn’t heard of the “Age Wave” (the millions of Baby Boomers now at retirement age?) We now know that, unlike some over-enthusiastic entrepreneurs have thought, they don’t spend their money frivolously. True, many of them have a significant amount of savings, but they are very careful about how they spend it.
So what do they spend their money on? Interestingly, as one might expect, they spend it on themselves to alleviate the predictable challenges that come with aging. Think aches and pains, for example, and “wellness” products.
This company is squarely in that sector, and better yet it is located in one of the acknowledged “retiree capitals” of Oregon. I can’t say where until I receive your non-disclosure agreement, but you will recognize it and agree I’m sure.
It’s just very nice to know that the business you are considering is underpinned by strong fundamental demand; demand that is universally acknowledged to be growing.
So what the heck is this business? Where is it? Can I run it from where I am? What’s the story?
The photo will give you a pretty good idea about what the business is. For the rest of the story, including financial details, please fill out the form to request more information. You will receive an NDA form, and if you’re OK with it, you will receive a ton of information. No pushy sales pitch, just detailed information that will enable you to make an informed decision.
That’s it. Pretty simple, no?
Not included in asking price.
Owned. Not included in asking price.
Building Square Feet:
Sellers prefer to sell the real estate and the business together to the same buyer. However, they will consider selling them separately (selling the business first, with a commercially appropriate lease.) Not interested in offering a lease-option on the real estate. Make offer.
There is some competition in the area, but nothing like the quality and reputation of this business.
Growth & Expansion:
Growth potential is driven by the continuing “age-wave” pressure. This business is located in a prime area of retirees, its major customer profile.
Support & Training:
Sellers will provide significant transition support, to be negotiated. In addition, the major vendor has an extremely robust support program. It’s like having a franchise support system but without having to pay a franchise fee or royalties. Seller will consider a consignment program for the inventory.
Reason for Selling:
Licensed in Oregon