$3,500 for $50,000 in revenue might be good but not great. If they’re used to spending $500 for the same revenues, then they may be looking to lower their acquisition costs.

The issue may be deeper. If their profit margins are 15%, like many businesses,$3,500 burns nearly half of their profits on acquisition, which may not be sustainable.

Business broker here. “Buy Then Build” is a solid place to start.

Business broker here.

There isn’t enough information to offer meaningful advice. Some opportunities like this can be a gold mine. Others should be avoided.

Business broker here.

I’m frequently talking to new food franchisees that are immediately failing. Covid/inflation has all at once raised rents, cost of goods, and employee wages, while decreasing customers disposable income and demand.

I’m sorry to say that if your dad’s store didn’t start off strong it’s probably not going to make it.

If he and his partner have the funds and fortitude to double down, they can push hard on marketing and community outreach.

If not, their only chance may be selling the business to another franchisee within the chain. Their chances of selling to an outsider is near zero.

Boba businesses are light on assets. The value of the business is probably under $100k.

Business broker here.

If the broker or seller will allow it, I recommend negotiating the terms of the sale before writing a formal LOI. You can save yourself time and money this way.

Send an email that defines what you want with contingencies:

Hi John,

Based on the information you’ve shared with me so far, I’m prepared to offer $225,000 for the business including the box truck.

The payments would be $75,000 paid at closing and $150,000 paid over time. I’m thinking we schedule the note payments for 10 years at the current prime rate of 8.5%. Payments would be $1,860/mo. generating over $73,000 in addition interest for you. I would rather you receive this interest than the bank.

If you would prefer a larger down payment, I will need a business loan. The interest will be much higher. My offer would be $210,000 to offset the cost. With a business loan it may be possible for the full amount to be paid at closing if the bank permits it.

We will need to define a few other items too such as a brief training period and agreeable non-compete terms.

This offer is contingent upon a satisfactory due diligence investigation of the business, a successful transfer of the lease, and acquisition of the business loan if it applies.

Let me know what you think.

Business broker here. Consider hiring a broker by the hour for consulting.

Business broker here.

I occasionally talk to startup founders who made foolish mistakes giving away equity and are now looking to buy it back.

A common grift to watch out for in the startup space are advisors or fractional executives looking to weasel their way into the equity of startups.

The advisor offers to help the naive founders with his wisdom and connections in exchange for a modest salary plus equity. When the startup cannot afford the salary, the advisor settles on the equity.

Turns out, an hour phone call each week, worth at most $100, is a pretty good trade for 5 or 10% of a promising new tech company.

It’s actually quite popular to pair SBA and SF.

Business broker here.

A $6-$7M business can be purchased using a maximum of $5M from an SBA loan and then either seller financing or a conventional bank loan.

Plan on bringing around $1M to the table of your own money or from private investors. You may be asked to put down 10% of the purchase or supply your own working capital once you take over.

Your story matters. The bank and the seller need to feel confident your team has the experience to run a business of this size and industry.

The most selfless people I know are entrepreneurs. The ones that survive are constantly thinking about how to serve others.

Business broker here.

• Determine the value of the business.
• Have the new partner pay a 1/3 of the value. The payment can either go to the other partners or to the business itself depending on several factors.
• If the partner does not have the money to buy into the business, consider a payment plan, or define what the partner will contribute to earn the equity.
• Have your attorney write an operating agreement to define how the partnership will function, and a buy-sell agreement defining how the partnership will end.
• Consider setting up two levels of compensation to partners. Distributions are paid to all partners proportional to their share of equity, and salaries are paid to active managers of the business.

Business broker here.

$1M in revenue at 40% EBITDA is great for a largely absentee restaurant.

There are many factors that influence the value. Assuming fairly average factors, the value might be around 3X the EBITDA, maybe $1.2M. If you’re selling to your partner rather than an outsider. The value of your share might be around $600k. (An outsider would pay less because they don’t have exclusive control of the business.)

An even bigger challenge than the valuation will be getting paid. Most partners don’t have the cash to buy out the other. Even if they did, they can simply refuse to spend it.

You might consider converting your equity into debt by adding the $600k to your existing note of $300k. Then you could settle part of the $900k by cashing it out early. For example, you could offer to take $150k in cash now in exchange for knocking out $200k in debt. This way your partner has a reason to use his cash reserves or to find outside money.

Business broker here.

I use BizBuySell regularly to sell businesses and help buyers find opportunities. It’s the most popular business for sale listing site in the US and probably the world.

The site is excellent at connecting buyers to brokers.

It’s not so good at connecting buyers to sellers, or sellers to brokers. It’s also not a reliable source for accurate information.

Business broker here.

Make an SBA loan your first choice if you can. I recommend contacting Live Oak Bank and Huntington Bank. They are national lenders that are good about lending on blue sky rather than just asset value.

You could also blend the sale with SBA and seller financing. As of August of this year, you may also retain a portion of the equity. By doing so, you might be able to bypass a down payment from your buyers making it easier for them to purchase.

Business broker here.

There are several strong listing sites. BizBuySell, BizQuest, and LoopNet are part of the same company. Together they show the majority of businesses listed for sale in the US.

After you identify a few categories of businesses that interest you, I recommend adding direct prospecting to your search. Letter, emails, and calls to the owners can get you in front of opportunities before they go to market.

Business broker here.

A “strong customer base” is rarely a primary selling point for a business.

By far, the main priority for a business buyer is the profit the business produces, which isn’t necessarily dependent upon a strong customer base.

Business broker here. Feel free to message me.

Consider looking up a handyman online to refer to her. A proper Google search might be all that’s necessary, which she may not be able to do on her own.

Business broker here.

Maybe more than 95% of businesses sold with a sellers broker in the US do not have a broker representing the buyer. You’re not likely to receive a discount on those grounds. But do negotiate the price and terms.

We are all slaves until we buy our freedom.