A fair number of clients come to us because they first did a search on BizBuySell. It’s the Amazon of business buying and selling. It hosts tens of thousands of active listings at any given time and if you do a basic search in the Kansas City area, as you browse through the listings you might even run across an Apex ad!
Our goal in this article is not to turn you into a BizBuySell client (because face it, we’re better), but to show you how those listings can help hone your own criteria as you shop for a business.
When you get to the site you’ll notice the very first prompt is geographical. Once you put in your state or city you’ll see the next field defaults to “all industries.” If you want to get a broad swath of choices, opt for a state instead of just one city.
As you look at your search results, you’ll see different filter options. The next logical filter to use is price range. No point looking at businesses that aren’t a good fit for your financial position.
Once you’ve put in your price range, you’re going to have an even narrower range of results, but still high-level enough for us to have a lot of options.
Asking Price vs Cash Flow
The most worthwhile listings are going to list cash flow right underneath the asking price. This allows potential buyers to immediately assess whether this proposition makes sense and is worth pursuing.
For example let’s say you see an asking price of $300,000 against a cash flow of $150,000. That’s a 2X multiple, which is standard for Main Street service businesses. That might be worth looking more deeply at.
Or you might see something listed for $500,000 and instead of cash flow it says “asset sale.” This is a different proposition from a standard business purchase and is going to require more work. That doesn’t mean it’s not potentially a good deal, it just means it should go in a different bucket among what you’re considering.
You don’t have all the time in the world to look at every listing, so you should first consider the ones that list cash flow. The businesses are usually pretty confidentially listed (though you’ll occasionally see a name, picture, and website of the business!) so there would need to be a good reason not to list cash flow. These might take extra investigation.
You can probably also skip past businesses which have high multiples but low cash flows. For example, if a business is doing $10M in revenue with $2M in cash flow, it wouldn’t be unreasonable to see a price of $8M or higher.
But if your business is doing $300,000 in revenue, with $30,000 in cash flow, and you see a price of $200,000, you’re probably looking at a pure asset sale (equipment and inventory). This may be a more distressed business that you might want to skip.
Industry or Business Type
Now it may seem funny that this is the last category we consider, but you have to realize it’s a lot easier to find a business that you might be a good fit for once you’ve taken a look at it versus insisting on only a few types of businesses that you are willing to look at. You really never know what might be a good fit.
On the other hand, be willing to be opinionated about what you want to do, because, after all, this is going to be a big part of your life going forward. If you don’t see yourself in an event rental or pest control business, cross those off your list.
What we recommend is keeping an open mind. The game of entrepreneurship is the same across many industries and business types. If entrepreneurship is what you’re after, there are many businesses that can suit your purposes.
Just as many might have found a career through what seems to be a combination of chance or providence rather than a set plan, so too the right business for you might not have been the one that you imagined, but the one that was a perfect fit, once you’d looked at the numbers, the opportunity, and had a chance to do your due diligence.
BizBuySell has a tremendous service, but they don’t have access to a lot of our private listings. If you want those, give us a call and we’ll be happy to share them with you.