Category Archives: sell a business

Why Buy A Towing Company

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When Buying a business –  It has been said by others Pay for the Past, Consider the Present, Buy for the future.  So what is most important when looking to buy an existing business.  How much weight do you put on last years numbers?   How important are the current numbers?  How much are you buying the business for the future numbers?  Past, present,  and future all matter.

But buying a business is buying the future. I am currently working with a Florida based Towing company that is interested in selling his business.  We are selling his Towing company for $1,400,000.              Towing Business For Sale It is easy to imagine a towing company to be no more than the guy that hooks up your car at the side of the road and tows it in for repairs and that is the extent of the business.  This Towing business for sale is much more  that.  I attempt to view businesses for sale from the perspective- “would I buy this business, and why or why not?”.

Why Should Your Buy Towing Company Business:

This Towing business for sale will be a solid business investment for someone and I’d like to highlight reasons why someone will buy this business:

1.   Multiple Income Streams- Yes they do tow cars, but the business model is so much more than that.  They derive revenue from towing, also, vehicles towed in very often pay a daily storage fee, sometimes for vehicles in accidents vehicle require “sealing the car with stretch wrap” to eliminate additional damage from weather, some vehicle owners elect to get vehicle serviced at the towing companies service shop, so there are service fees, some vehicles get towed in and never get claimed.(more than you would think).  These vehicles get fixed and resold, sold for parts, or sold for scrap.   So Income comes from:  a.  Towing,  b. Storage,  c. Securing  d. Storage              e. Service work  f.resale  g. Disposal

2.   Significant Assets are included in purchase Price- Land, multiple buildings, multiple trucks, equipment collectively total over $1,000,000.   I have never been a fan of buying a business because of the assets- Usually cash flow is main area of interest.  But owning the property that your business operates on and paying “yourself the rent”, allows you both control and the ability to enjoy appreciation of this asset as you grow your business.  Also, securing money for your business is easier with assets on your balance sheet.

3.   Good Cash Flow–  This Towing  business generate about $160,000 a year in cash flow.  With Revenues of about $600,000 this is a respectable cash flow. Cash flow has been fairly steady and consistent over a several year period.

4.   A Towing Business is a Recession Resistant Business- There may be a business that is “Recession Proof”, but I am not so sure what that business may be. The economic downturn that began in 2008 has been both extended and far reaching.  Outside of insurance companies, most businessesIi know of have felt the effects of this downturn by significant reduction in revenues.  The towing business is a service that is neither a “luxury item” nor discretionary expense.   A towing company provides a service that is needed regardless of the economy.  This business did realize a 12% reduction in revenues, but compared to the 20%, 30%, and 40%+ reductions in revenues by many of the businesses that i have been working with, this dip in revenue is minimal.

5.   Future Prospects– Business has opportunity to add an onsite used car auto division.(both the land and building exist and the towing nature of the business results in vehicles potential for resale).  Service department has considerable room for growth, and unlike many auto service companies that may wonder where their next customer may come from, the towing operations bring customers in!  As with the auto resale operation, most of the infra structure is in place,  incremental revenue  could result in substantial incremental cash flow.

Towing Company

Photo (c) grandrapidsmilocksmith.com

Yes , I have a vested interest in the sale of this towing company.  I stand to gain financially as this business sells.  I also  attain personal satisfaction helping a long term business owner work thru this process of transition.  Finding the right buyer and getting the right price and terms for this business are the goals we set.

I believe this Towing business for sale will be of benefit to the right buyer.

Business Succession

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Last week I was asked to speak at a small business seminar on business succession as it relates to selling a business here in Florida.  Succession planning in general  is the process of preparing to hand over control of the business to others. Very often family may be part of succession planning and while most businesses do not have any plans for business succession, those that do, fall short in the planning and communication of those plans. So you are working hard on your business now, what is your plan?

  • Build up  your business to a nice size and sell your business for great financial gain?
  • Pass your business on to your kids
  • Arrange an LBO for key employees
  • Work your butt off, make enough money to pay your bills and do this til you are no longer on this earth.
  • other

Business SuccessWe are all busy running and or growing our businesses, but last week  a few business owner did consider this issue important enough to take a few hours out of their day to attend this workshop and  begin understanding the process.

Presenting at this workshop were an Attorney, a CPA, an insurance provider, and myself.  This seminar was attended by local small business owners seeking knowledge on this topic.  What I found most interesting was that the Attorney, CPA, and I spoke on many of the same issue regarding selling your business  We all spoke for about 1/2 an hour and didn’t coordinate on what we would speak on.  While we touched on the the different aspects surrounding business succession,  I found we spoke on many of the same points, but due to our professions we spoke on those point from varying perspective.

When discussing seller financing for your business, the attorney spoke of the need for extreme caution when setting up seller financing, and additional care extended when family or fiends involved.  The CPA spoke to the proper records to be kept to document what you have and be able to show what you had in the way of your companies performance.  My discussion regarding seller financing  addressed the prevalence of seller financing in the marketplace and the need to be able to offer it to help make a deal happen in to days tight credit market.

What Your Business Success Relies On?

A few key points from this workshop:

  1. Most businesses do not have a succession plan.
  2. Planning is the most important first step.
  3. Seller financing can help facilitate a deal but one must do proper due diligence.
  4. Relying on your business as your only source of retirement funds is dangerous and mis guided.
  5. When doing your annual reviews of company numbers or tax preparation, use that as a good time to look at other matters as it relates to your biger picture

My suggestion is between handling your accounts receivables, accounts pay ables, other office paperwork, social networking, working with clients, and  returning phone calls/emails, take a moment to consider what your exit plan may be.  Even if you just give the subject a few moments of thought, you may find yourself ahead of most or your peers and fellow business owners.

Also, the Internet is a great source of information on business succession and other business matters, but also keep your eyes open for the various seminars, workshops, and expos that may be in your area.  They are not only a great source of knowledge, but also a great opportunity for the “other type” of social networking.

Using Your 401k to Buy a Business or Grow Your Business

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For many in the workforce their 401k can  represents a large portion of their net worth.  Many don’t realize that  they can use these funds to buy a business even before they reach 59 1/2 without incurring the often heard of  penalties and negative tax consequences.  Many of those that buy a business or want to buy a business are currently employees for others.  Future business buyers are currently working for someone else.  And there are many employed that are earning their hourly wage or salary, have minimal savings, but have accumulated a healthy balance in their 401k.

Using 401k To Buy A Business

This is ones safety net for the retirement years.  Even considering using this “security blanket” to fund your business or to use to buy a business needs to be well thought out and involved the counsel of your accountant or financial advisor.  Using your own savings, borrowing from family or friends, borrowing against equity of your own home are all means to fund your acquisition, and some more desirable than others.

I consider myself a somewhat conservative entrepreneur( which may sound like an oxymoron).  But the more I involve myself with the dilemma or how to finance business acquisitions, and are banks really loaning money to those that want  to buy a business, and more specifically are banks making smaller loans to those that want to buy a small business  (say $200,000 and lower) other means of financing should be considered. Ive always felt that banks do provide loans to those that can prove that they dont need it, and now that point is even stronger than in the past.

An SBA loan should be explored.  They are available and the requirements for documents, security, and your financial well being can be both daunting and take considerable time.  But one should explore this option.

Furthermore, when I initially hear of someone using a 401k to either fund a business or buy a business, I think penalties, fees, and shrinking nest egg.  But like so much in the accounting and tax world the devil is in the detail.

Using Your 401k Money To Buy A Business Can Mean Many Different Things

Using your 401k can mean ….

1. Just taking money out of your 401k .  – Just a Bad idea for so many different reasons

2. Taking a loan from your 401k- Most plans offer this options, there usually is amount restrictions, but you do pay interest back to your self.

3. Setting up a Self directed qualified plan(using a third party that specializes in this process)  that allows you to purchase  a franchise, or  buy a business without distribution, taxes, penalties, or the use of loans.

Setting up a Self Directed Qualified plan involves the following steps:

  • Form a C-Corporation
  • Prepare the adoption documents for your New 401k plan for your new corporation
  • Corporation Valuation
  • Rollover- direct rollover from your 401k plan into your new account
  • You as a Trustee will transfer money into your corporation checking account

Please note the above is a simplified summary, but does represent the spirit of the steps involved with setting up a Self directed plan to buy a business. There  are cost to hiring a third party to administer setting up a self directed Plan to buy a business.   It is their job and responsibility to guide you thru the specific process.

Using 401k To Buy A Business As A Last Resort

There are also some additional annual reporting requirements to be done by your accountant.   But if one wants to avoid a bank, or avoid borrowing from family or friends, or avoid borrowing against your home, then maybe using your 401k to set up a self directed plan to buy a business warrants further investigation.

“Earn $10,000 per Month Working just 2 Hours per Day!? “

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“Earn $10,000 Per Month Working just 2 Hours per Week”… “Lose 10 pounds per day by just Sitting on Your Sofa”… “Take this Pill and all Women will Love You”…

Eye catching titles intending to entice one to read your message. Many of us use the Internet to further our knowledge and educate ourselves on our areas of interest.

I am in the business of helping people buy businesses and sell businesses. I also do get involved with business consulting to both startups and small businesses. The above headings are written to get our attention and get us to read.

Is It True Or Just A Marketing Trick?

Does one think that you can get rich just working a couple hours per week? Lose weight by laying on the sofa? I dont think we really  believe it to be probable – maybe we think it to be remotely possible, and just that sliver of hope warrants us to spend our valuable time to read.

Optimism is a wonderful trait-when tempered. Kind of like the optimist that falls off a 90 story building and while falling past the 50th floor says to himself – “so far so good.”

Small business is of great interest to me, and I have various sources of information that I tend to follow. I write for a website that reaches many entrepreneurs, aspiring business owners and current business owners searching for both information and opportunities.  On my own website, I list 1000 plus businesses for sale from Florida and around the United States.  Within these businesses for sale certainly exist tremendous opportunity for those willing to put in the necessary risk and hard work.

And yes one buying one of the many businesses for sale  you can earn $10,000 per month only working a couple hours per week…. But that may occur only after 10 years of working 14 hours day, initially struggling to pay the bills, and dealing with daily dealing with setbacks, and disappointment.

Yes, maybe after you have exercised a)  a good business plan, in b)  a good industry and c) are well funded and d)  properly timed your venture you could earn that money – i.e. One could find quality people to help one execute a solid business plan for a well funded Typewriter Company…. But success would be unlikely – the same above scenario, executed 40 years ago may have proved successful. The timing for a typewriter company has come and gone.

There are people that “hit a homerun” and reach significant financial success with apparent little effort in a short period of time and capitalized on a new idea as the typewriter people may have several years ago.  But I think for every one of those success stories there are the 10,000 others that reach success through long term hard work.

Start Your Business

Photo (c) financeonlines.com

A person may start a business or buy a business and sell it next year for rich rewards. But, I am convinced that most financially independent success stories are the result of hard work over an extended period of time. And for me much of the good valuable advise I have attained throughout the years came through extended conversations, and trial and error – It does not come through short cryptic eye catching statements.

As a writer of a blog based on my experience as a business owner directly involved with several business acquisition,  I contemplate the question of writing what I think readers may want to read or the information that I think small business owners and aspiring entrepreneurs should read. Style or substance – I will tend toward substance knowing I will regularly not catch the eye of the readers looking to “get rich today – retire tomorrow.”

If I write an article about “Why is It Important That A Business Owner Understands His/Hers Balance Sheet,” will it be read? I dont know, but I know it would add value.

Real Business Advises

Some of the advise regarding starting a business, running a business, or buying a business can appear fairly boring and non eye-catching –

  • Do Your Homework
  • Educate Yourself
  • Understand that you will be rarely over-funded
  • Expect to Work Hard (working at “your job” or for others may be hard- but this will probably be harder-maybe more enjoyable, but harder)
  • Expect setbacks and accept it will be up to you to overcome them.

But I do think that readers that are reading small business/entrepreneur blogs, news feeds etc. are taking an important step in educating themselves which is a valuable part of the process of reaching financial independence and or entrepreneurial business success.

Starting a Business in a Recession

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Some business owners and Entrepreneurs are good planners.  Some are not.  Some consider themselves “do’ers” that they are very good at doing what they do and really don’t have the time to plan for next year or the year after, or for 5-years from now.  The economic climate has done more than bringing on lower sales, lower profits and lost employment.

It is a sound business practice to have a plan or idea that extends beyond the current year.  Many sound business owners and operators had planned to sell or exit their business, and then were hit by the drop in their stock portfolio, retirement funds, drop in home value and depressed company results.  So those well laid out plans are delayed as a result of the business environment.

Is It Wise To Start A Business In A Recession?

Starting A Business In Recession

Photo (c) drewsmarketingminute.com

What about the small business owner that had planned to start a business, or buy a business only to feel the need to address the question-   Can I start a new business during a recession?  What does one do?  Delay the decision until the economy turns around, or move ahead regardless of the slumping economy.  When running and or growing a business for an extended period of time ( say 10-20+ years), it is inevitable that you will need to operate that business during both good economic times and bad economic times.  How much do you allow the economic climate to be an excuse/reason/crutch or do you  try to just work harder thru it.  I personally view this economic downturn that we currently operate to be quite different than any “downturn” I have seen in my 25 years of business.

Most of what I read and discuss with others refer to our current economic environment  as  a Recession.   But is it possibly a  Depression?  A common offhanded comment defines A Recession is when your neighbor looses their job, A Depression is when you lose your job.  Respective governments have criteria used to establish Depression and or Recession.  I question the accuracy and application to our newer global economy.

I also question how much our politicians and policy makers really know what the business climate really is at the “street level”.  I actually think our economic climate we have been operating in is neither a Recession or a Depression but rather a hybrid  maybe there is a need for a new or different term to refer to our business environment.  I think the non-existent term   “DEP-RECESSION” may apply.

The Importance Of Proper Timing In Business

So what do you do with your plans to start that business or buy that business?  Do you delay or press ahead?  My thought is that it is somewhat dependent upon the business venture.  Many businesses and consumers  still need to procure certain products or services to allow their household or business to continue.  But some buying decisions can be put on hold or delayed until the economic uncertainty passes.  How much your product/service may be considered a discretionary expenditure may influence your decision to go forward or delay.

For example if you are in the paper business, businesses still need paper to run their operation or make copies.  But a business may not be compelled to buy that new copier and may decide to just “get by” with the one they have.  Most small business owners and entrepreneurs I know are more of the press ahead type and fairly aggressive with their business decisions.

Should one delay the decision to start or buy a business until the economy improves?  I’m not so sure, but what if it takes 2-5 more years to improve.- This almost  sounds like an answer to this question.