Funding options to buy a business?

[samson132]

What funding options are available if I want to buy a business?

What if the business is online for example?

Thanks,

Sam

 

[fisicx]

How much are you putting up? The bigger percentage you have the move funding options become available.

 

[samson132]

This is what I'm looking to understand, I can't really say jus trying to get an idea. Could be 10% could be 90% depends on how much I can borrow.

 

[fisicx]

Still nowhere near enough information to offer much advice. It all depends on the value of the business, they type of business, the running costs and so much more.

Expect to have to find at least 50% yourself.

 

[WaveJumper]

What sort of value are you looking at 100k or 1m so many variables much more information is needed before anyone can give any proper advice

 

[Mark T Jones]

Start Up loans can be used to buy a business

They will lean on your business plan what you are buying and your relevant skills and experience to run the business

@fisicx is kind of wrong what you are putting in financially isn't terribly important. What really matters is what you are bringing I terms of skills and experience

 

[The Byre]

If you do not know how to buy a business, please don't buy a business. It's a great deal harder and more complex than buying a house!

 

[AW-UK]

I would seek advice from someone who is an investor, your bank manager might be able to give you a good insight, if you tell them you are considering buying a business ask them what they would need to consider lending you money, they won't give you all of the answers, but you'll have a good idea of what due diligence you need to do. You will at the very least need some kind of business plan I would have thought, and a direction of where you want to take the company after you have bought it.

 

[The Byre]

What funding options are available if I want to buy a business?

Have a read through this lot first! http://ukbusinessbrokers.com/gallery/

 

[samson132]

Thanks all, looking roughly for something that makes a profit of circa 100k a year, so likely turnover will be about 300k.

 

[The Byre]

Aren't we all! I'll take ten!

I did a couple of videos on this subject and @Clinton's website (link I gave above) outlines some of the pitfalls and problems and possibilities.

Be warned - a bit like partnerships - most M&As end in tears and usually for the purchaser, but there are ways to get a fool and business to part ways for free. That is why it is vital that you get someone on-side who understands this field. It is never a simple affair of transfer of ownership.

Successful M&As are very often between parties that know each other, rivals, employees (management buyouts) customers, suppliers, etc.

Some observations -

• Companies that sell stuff everybody can sell (e.g. Chinese tat) are worth very little if anything.
• Companies that hold a strategic position in the market are worth a great deal.
• Companies in which the owner has to work full-time are often really just a job.
• TUPE laws apply, even with an asset buy-out.
• Due diligence is everything. Check everything about the owners, their credit rating, their history, other linked companies, companies working from the same address - everything.

something that makes a profit of circa 100k a year, so likely turnover will be about 300k.

A REAL company with those figures will only be for sale if it is a bear-trap.

 

[ctrlbrk]

Thanks all, looking roughly for something that makes a profit of circa 100k a year, so likely turnover will be about 300k.

Are you saying that all the businesses that make 100k profit/year have a turnover of 300k?

 

[Mark T Jones]

Your requirements seem rather arbitrary and unfocused - which will make you a magnet for the many crooked brokers out there.

What are your actual, real end goals?

What are your skills and specialisms?

 

[samson132]

There's a lot of snarky comments here, I'm just trying to get an understanding of the space.

I just provided an example, most online content businesses tend to sell for 3 x annual profits, retail businesses seem more like 2 x though these numbers increase as the profits do.

In terms of skills I work in growth, my objective is to grow businesses through online and product based marketing. I've been doing this for over 10 years though have had businesses in the past, two of which I've sold.

However, I've never bought a business or used leverage to grow one (apart from buy-2-lets) if that counts.

I now have a chunk of savings and am exploring going on my own but I don't want to buy a job, or use all my money up putting me at personal risk, hence I'm exploring financing opportunities.

However it seems all cloak and daggers with a bit of an "old boys club", I think in all honestly I'll get more assistance from the start-up community seems a lot more friendly and welcoming to younger crowd used to faster businesses. So will look there.

 

[The Byre]

I cannot speak for others, but I wrote what I did so that you get to hear the truth about buying a business. As Ayn Rand wrote, "You can always ignore reality, but you can never ignore the consequences of ignoring reality."

Have a look at those articles on that page I linked to.

It's not cloak-and-daggers, it's just that there are loads of charlatans out there in the M&A sector. People who tell you that you can buy companies for next-to-nothing, using leverage against the company assets. Those the very friendly and extremely welcoming 'Buy a company for a pound!' merchants.

Right now, the whole of society is restructuring at 90mph and hundreds of thousands of wannabe business people are being thrown out into the cold, trying to fathom out what is real and what is fugazi. It reminds me of my early days in the music biz.

 

[Chris Ashdown]

There's a lot of snarky comments here, I'm just trying to get an understanding of the space.

I just provided an example, most online content businesses tend to sell for 3 x annual profits, retail businesses seem more like 2 x though these numbers increase as the profits do.

This is a Fallacy that is mentioned down the pubs of the UK by the non business owners

In terms of skills I work in growth, my objective is to grow businesses through online and product based marketing. I've been doing this for over 10 years though have had businesses in the past, two of which I've sold.

However, I've never bought a business or used leverage to grow one (apart from buy-2-lets) if that counts.

I now have a chunk of savings and am exploring going on my own but I don't want to buy a job, or use all my money up putting me at personal risk, hence I'm exploring financing opportunities.

You would be at personal risk with bank guarantees and others. The lenders seldom give money away they loan it unless buying shares

However it seems all cloak and daggers with a bit of an "old boys club", I think in all honestly I'll get more assistance from the start-up community seems a lot more friendly and welcoming to younger crowd used to faster businesses. So will look there.

If you want answers that please you then its not advice your looking for. Is the £100K before owners wages or after, real profit or paper profit

 

[Socio South West]

I just provided an example, most online content businesses tend to sell for 3 x annual profits, retail businesses seem more like 2 x though these numbers increase as the profits do.

Are you sure these are SALE prices and not ASKING prices - in the field of business sales the two are often very different once the books have been examined and offers made against the asking price.

To answer your original question.... The better you prepare information and forecasts showing solid profitability the more options you will have to borrow money.

If the refusals start stacking up despite the figures you have generated, then think again about the business you are buying.

 

[AW-UK]

Ultimately it is your money, but just do your homework first, there are some companies that lose a bit of trade due to customers staying only for the people involved, if you suddenly change the person then that triggers something in some people.

 

[Mark T Jones]

I've no idea if my replies come under your snarky banner


.with 30+ years experience I see myself as a lending industry elder and give answers from experience rather than fake hugs or- far worse- false promises to extract fees

Unfortunately neither your opening question nor responses give any information that will help a properly informed response.

However, I will expand

In the current climate, no mainstream bank or lender will lend to you to buy a random business, irrespective of cash stake or security. A possible exception is your existing bank who had insight yo your ability to build successful businesses.

If your target purchase has assets, it might be possible to borrow against them.

If you personally have b & m assets with meaningful security, , you can potentially borrow against them ( there are few sharks out there)


Start Up loans might lend against a solid business plan

There might be other avenues, which will very much depend on you your plans and your relevant experience

 

[Free Stuff For Startups]

Something that is relatively new is revenue based funding. If the company you are looking to buy has a regular recurring revenue over £10K month there are lenders that will lend multiples of that revenue stream without requiring personal guarantees and you repay as a percentage of the revenue your revenue stream, so if things go quiet ( like in a lockdown) you are not facing crippling repayments. It wont solve all your funding requirements, but it could be a useful contribution to them.

 

[Clinton]

This is what I'm looking to understand, I can't really say jus trying to get an idea. Could be 10% could be 90% depends on how much I can borrow.

This is the kind of vague answer that tells me the person is not cut out for the acquisition game.

You were asked "How much are you putting up?"

Give a number in pounds! And then a firm percentage!

Thanks all, looking roughly for something that makes a profit of circa 100k a year, so likely turnover will be about 300k.

Not necessarily! T/o could be just over £100K or it could be over £1m.

I now have a chunk of savings and am exploring going on my own but I don't want to buy a job, or use all my money up putting me at personal risk, hence I'm exploring financing opportunities.

However it seems all cloak and daggers with a bit of an "old boys club"...

It's not cloak and daggers, but people generally don't want to deal with a rank amateur because amateurs tend to be a right pain in the ass.

They tend to not know what they want, they ask silly questions through the sale process, they are coy when talking about money instead of just stating what funds they are willing to stump up at the start, they don't understand common business terminology (whether it's EV to equity bridge or locked box vs completion accounts) and the list goes on.

Their inexperience and mistakes end up often costing the other side time and money and a ton of frustration. So if you hit brick walls it's because of your lack of experience. Go hire someone* who knows what they're doing with acquisitions in this sector ...and pay them well.
*No, no, not me. I wouldn't take this on.

Or spend a few months learning the ropes. No, no, don't sign up for one of the numerous £1 Charlie courses! Go and watch some David C Barnett videos in Youtube, or buy Richard Parker's materials. I've known both those guys since forever and they really know their stuff. I think you'd still be better off just hiring an expert. I don't understand why people don't start with that in the first place! Perhaps they think buying a business is like buying a pint of milk and that no special skill is involved.

 

[Mark T Jones]

This is the kind of vague answer that tells me the person is not cut out for the acquisition game.

You were asked "How much are you putting up?"

Give a number in pounds! And then a firm percentage!


Not necessarily! T/o could be just over £100K or it could be over £1m.


It's not cloak and daggers, but people generally don't want to deal with a rank amateur because amateurs tend to be a right pain in the ass.

They tend to not know what they want, they ask silly questions through the sale process, they are coy when talking about money instead of just stating what funds they are willing to stump up at the start, they don't understand common business terminology (whether it's EV to equity bridge or locked box vs completion accounts) and the list goes on.

Their inexperience and mistakes end up often costing the other side time and money and a ton of frustration. So if you hit brick walls it's because of your lack of experience. Go hire someone* who knows what they're doing with acquisitions in this sector ...and pay them well.
*No, no, not me. I wouldn't take this on.

Or spend a few months learning the ropes. No, no, don't sign up for one of the numerous £1 Charlie courses! Go and watch some David C Barnett videos in Youtube, or buy Richard Parker's materials. I've known both those guys since forever and they really know their stuff. I think you'd still be better off just hiring an expert. I don't understand why people don't start with that in the first place! Perhaps they think buying a business is like buying a pint of milk and that no special skill is involved.

Welcome back!

 

[japancool]

They tend to not know what they want, they ask silly questions through the sale process, they are coy when talking about money instead of just stating what funds they are willing to stump up at the start, they don't understand common business terminology (whether it's EV to equity bridge or locked box vs completion accounts) and the list goes on.

Could be worse. Could be a kid in his bedroom trying to buy Man United.

 

[fisicx]

Could be worse. Could be a kid in his bedroom trying to buy Man United.

Indeed, @Clinton missed that one, a golden opportunity.