Have you been thinking that business ownership is for you? Many people are committed to the idea of owning a business and work hard to pursue this goal. Of course, the path towards buying a business is indeed complicated and requires a significant investment of not only money but also time. As a result, you’ll want to ensure that you are fully committed to business ownership before beginning the process. Let’s take a look at some common reasons why individuals choose to buy a business.
Desire to Grow Your Income
Most people will say that they would like to make more money. However, keep in mind that while owning a business will likely mean you grow your income, it also requires a significant amount of work, especially in the early stages.
Research shows that the longer you own your business, the more profits you will generate. Those who have owned their business for more than a decade will typically earn more than 100K a year. Of course, owning a business always comes with a degree of financial risk, but if you do successfully run your company for a series of years, you will likely succeed financially. Just be prepared for the possibility that the first few years may not generate as much income as you had hoped.
On the positive side, owning your own business allows you to have control over your financial destiny. You have the ability to make decisions that will grow your business
Interest in Shaping Your Lifestyle
When you work for someone else’s business, the way your life is organized is dictated by the rules and regulations of the company. For example, you may want to work at home, but your job requires you to spend 40 hours a week in the office.
If you want to make key decisions that impact your day-to-day life, owning a business will be quite attractive to you. You will be able to decide not only where you work, but also how many hours you work and with whom you work. You have the power and ability to shape many aspects of not only your life, but the life of your employees as well.
You are Willing to Take on Some Risk
The personality of a typical business owner is a person who is comfortable with taking on some risks. After all, not all businesses succeed. At some level, you are always risking your time, money, and energy. Of course, this aspect will vary dramatically depending on the kind of business you acquire.
It is also important to consider that many business owners find that they are working around the clock. They simply cannot go home and forget about their job at the end of the day. In sharp contrast, they are always on call and actively thinking about their business and relevant decisions. You also may not get a paid vacation or sick days.
Guardian Life Small Business Research Institute studied the ideal personality traits for a business owner and found that successful owners are action oriented, curious, self-fulfilled, tech-savvy, and future focused. They surveyed over 1,000 small businesses to generate this data. If you resonate with these traits, it is likely you are indeed cut out to own a business.
The post Three Reasons Why You Might Want to Own a Business appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
BizBuySell is an online resource that focuses on offering unique content that specifically addresses the needs of buyers and sellers. To make this happen, BizBuySell has teamed with a range of experienced business brokers who are covering topics relevant to business owners, buyers, and sellers. For example, they feature articles that focus on how to make a business more interesting to a potential buyer. These resources help to position BizBuySell as a go-to place for a range of relevant business information.
Of course, every quarter BizBuySell publishes Insight Reports complete with interactive market data. These reports offer a comprehensive overview of trends that are essential for brokerage professionals to know about. The latest report can be accessed here. It covers important trends noted in the first quarter of the year.
Some of the changes that were noted in this important report include the following:
1. Rebounding Transactions
For Q1 2022, the Quarterly Report indicates that transactions are continuing to rebound from the slump of Q2 2020. Year over year, transactions shot up a whopping 24% and are now beginning to return to 2019 levels.
Overall, the main sector that seems to be holding back an even stronger rebound is the restaurant sector, which is still not where it was in pre-pandemic years. However, with that stated, the restaurant sector has also dramatically improved and has shot up by 42% year over year. Yet, the restaurant sector is still down 22% from Q1 2019.
2. Changing Buyer Preferences
When BizBuySell surveyed buyers as to what kind of business they wanted to buy, the numbers were eye opening. 35% of surveyed buyers responded that they were interested in the service sector, and this was followed by 15% of respondents choosing retail. Director of Sales Doug Whitmire stated, “Buyer demand seems to be leaning toward business services, self-storage, car washes, as well as advanced distribution services for manufacturers. There have been few opportunities, so buyers are flocking to them and inventory is limited.” The result of the limited inventory is record sales prices.
3. Listing Growth
In Q1 2022 listing growth has increased substantially, with service listings up 14%. While the restaurant sector is obviously still lagging, it is important to note that the Quarterly Report indicated that restaurants were experiencing a 10% growth. If the pandemic continues to recede, we could see a robust rebound in the restaurant sector.
4. A Boom in Sellers
The Q1 report also indicates that sellers, who have previously been sitting on the sidelines, are deciding that now is the time to sell. Once again there is talk of a “silver tsunami” approaching as Baby Boomers begin to sell. It is also interesting to note that many of those who are selling are doing so due to burnout. Importantly, burnout is occurring for a variety of diverse reasons, ranging from supply chain and labor issues to pandemic burnout.
Advice for Sellers
The BizBuySell team strongly advises that sellers should fix major supply chain issues before entering the market. Whitmire noted, “We try to get our clients to work with us to fix those issues before we go to market. Many times, you only have one chance with a buyer and then you lose them.” It definitely makes sense for sellers to try their best to remedy any issues that might have resulted from Covid-related circumstances. This will ensure that the sales process goes as smoothly as possible.
Many people assume they know what “fairness opinion” means because they are familiar with the term “fair market value.” Fair market value refers to a price that is reasonable for both a buyer and seller in an open and competitive market. However, a fairness opinion is quite different. This term refers to a report that evaluates the facts of a merger or acquisition or any other type of business purchase.
A fairness opinion is typically in the form of a letter that contains an actual opinion and justification of why a selling price is fair. Of course, there are limitations, as this report is fully based on information that has been provided by the management of the business.
Who Prepares a Fairness Opinion?
A fairness opinion must be prepared by a professional with expertise in business valuation. It is typically done by a business intermediary or appraiser. An investment banker can also prepare a fairness opinion. Although the professional who prepares the fairness opinion may very well have experience in structuring deals, this letter does not include any information or opinion on the deal itself. It also doesn’t include advice or recommendation. In preparing the report, the advisor seeks to look at the deal from the perspective of the investors.
Basically, it is structured to specifically comment on fairness from a financial perspective, based on the information on hand.
Who Uses Fairness Opinions?
You will most frequently see fairness opinions utilized in the sale of public companies by the board of directors. When this document is received, it shows that the board is working to protect the shareholders. Of course, fairness opinions can also be used for private companies. In this case, it can serve to protect the interest of shareholders or family members who may later look to challenge the sales price. However, in most situations that involve middle market private acquisitions, a fairness opinion is not necessary.
In the end, a fairness opinion assists with communication and decision-making. It serves to lower the risks surrounding a deal. This important document can be used in court if a shareholder later decides to file a lawsuit against the director of a company.
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