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onetime2 · 07-02-2004, 04:27 AM

Alot of good advice above but I do disagree with what the typical multiplier is for EBITDA. It's going to vary (sometimes significantly) by industry and you need to adjust it based on the individual case you're in.

Some things you need to understand:

Current liabilities of the business- the obvious ones are debt for land, buildings, equipment, etc and whether they will be paid off in the transaction or you need to assume them. The not so obvious ones are debts to distributors or suppliers and the current business owner's standing with them. I know people who have bought bars only to learn the last owner was screwing over the liquor supplier and the supplier would only make deliveries COD even after the new owners took over. It took them more than a year to build any ability to pay by invoice (invoicing generally allows you some time to pay the bill usually net 30 or 45 meaning that's when the payment needs to get to the supplier).

Hazards-gas stations are notorious for pollution. A leaking tank (whether it leads now or it leaked 40 years ago) is a huge environmental hazard to you. It could easily kill any chance at profitability.

Corporations, LLC's, etc- you need to figure out how you will incorporate the business to protect your personal assets. LLCs typically give you less protection than a full incorporation but cost less to execute but they offer more protection than being unincorporated at all.

Personally, I would look at your general area's needs rather than looking from a business type persepective. What is lacking in the area you're looking to own a business? What's growing? Do the industries that are growing need certain types of support that's lacking right now? (copy centers, archiving, storage, etc?)

A close friend had outstanding luck with purchasing a flower shop. Relatively little in the way of start up costs, no franchising fees, a little money to sign up with the FTD type services, rent for a little space, and a delivery van or two. It turned out really well for him.

The SBA (small business administration) is an excellent starting point. They offer excellent resources (including help from local retired business owners and executives who volunteer their time to help people just starting out).

Good luck and please let us know how it turns out.

07-02-2004, 04:27 AM	#3 (permalink)
onetime2 Junkie Location: NJ	Alot of good advice above but I do disagree with what the typical multiplier is for EBITDA. It's going to vary (sometimes significantly) by industry and you need to adjust it based on the individual case you're in. Some things you need to understand: Current liabilities of the business- the obvious ones are debt for land, buildings, equipment, etc and whether they will be paid off in the transaction or you need to assume them. The not so obvious ones are debts to distributors or suppliers and the current business owner's standing with them. I know people who have bought bars only to learn the last owner was screwing over the liquor supplier and the supplier would only make deliveries COD even after the new owners took over. It took them more than a year to build any ability to pay by invoice (invoicing generally allows you some time to pay the bill usually net 30 or 45 meaning that's when the payment needs to get to the supplier). Hazards-gas stations are notorious for pollution. A leaking tank (whether it leads now or it leaked 40 years ago) is a huge environmental hazard to you. It could easily kill any chance at profitability. Corporations, LLC's, etc- you need to figure out how you will incorporate the business to protect your personal assets. LLCs typically give you less protection than a full incorporation but cost less to execute but they offer more protection than being unincorporated at all. Personally, I would look at your general area's needs rather than looking from a business type persepective. What is lacking in the area you're looking to own a business? What's growing? Do the industries that are growing need certain types of support that's lacking right now? (copy centers, archiving, storage, etc?) A close friend had outstanding luck with purchasing a flower shop. Relatively little in the way of start up costs, no franchising fees, a little money to sign up with the FTD type services, rent for a little space, and a delivery van or two. It turned out really well for him. The SBA (small business administration) is an excellent starting point. They offer excellent resources (including help from local retired business owners and executives who volunteer their time to help people just starting out). Good luck and please let us know how it turns out. __________________ Strive to be more curious than ignorant.