Carpe Diem -- Seize the Opportunity to Grow Your Business

By Emery Ellinger

My Dad told me when I was a kid that “there will be 3 times in your life that if you have cash you will be able to make a lot of money.” I have lived through the Oil Embargo, The Tech Meltdown, the Savings and Loan Crisis, but I have never seen an opportunity like the one created by this downturn.

The “Great Recession” has created an unbelievable opportunity to buy businesses, real estate, stocks and other assets at steeply discounted prices. The key question is: what are you as a business owner going to do about this opportunity?

You have choices - do nothing, or seize the opportunity (Carpe Diem).

Most business owners are shell-shocked over the last three years and want to rebound naturally. Others are taking advantage of the timing.

Below are several examples of bigger companies buying other smaller players to continue their growth.

1. Recently we represented the largest Tampa Bay Commercial Lawn Care company, Raymow Enterprises, in the sale of its business to the largest lawn care company in the United States, ValleyCrest. Clearly, the buyer saw the market opportunity to acquire market share by buying additional companies in this downturn.
   

2. We also represented a local dental company in the sale of its practice to a large dental buyer who is acquiring dental practices throughout the United States.

3. Additionally, we just sold a pest control company to a company that is acquiring several pest control companies.

What is the common factor in these business purchases? The buyers are buying companies within their industry to grow their sales and profits.

So, this begs the question for you and your business. Should YOU buy another business now?

With the economy rebounding, I would advise that this is an opportune time to buy another business if it fits into your strategic plans. Strategically, are you trying to expand into new territories, or add additional services?

Then consider, if you have always wanted to expand your business into Orlando, or the Georgia market, that it may be cheaper to buy an existing company which already has those local client relationships. You may also want to buy a company that has an ancillary service to yours, and therefore be able to cross-sell those services immediately to your customer base. This means that you have increased the sales and profits through this acquisition making it easier to pay for the acquisition.

So now let's talk about financing a business acquisition. You completely understand the window of opportunity you have to purchase another business, and you want to seize the opportunity. You may need help identifying companies that want to sell, but for this article let’s assume you have identified a company you want to buy. Now it is a question of how to finance the purchase.

Banks like to lend to successful businesses or business people who have a track record of success in a certain industry. The bank will require a down payment of 10-20%, maybe more, towards the purchase. You may get additional help from the seller of the business with financing. This will make the deal better for you and better for the bank to know that the seller is confident enough to “finance” part of the purchase.

There are several types of loans that are commonly used to borrow for a business acquisition. One is a traditional loan, and the other is an SBA loan (made by a bank, but backed by the U.S. Government).

If you have a well-established business, then traditional bank loans will be easier to obtain from your current bank. Another option is SBA loans which have longer payment terms and lower interest rates, and were established to keep our economy growing. SBA loans require much more paperwork, but may help you get a “YES” to a loan when you haven’t been able to get a traditional loan.

The lending markets are improving, the economy is rebounding and hopefully your business is rebounding too. These make excellent times to Carpe Diem (Seize The Day)!

About the Author
Emery Ellinger is Chief Executive Officer of Aberdeen Advisors, Inc. Aberdeen Advisors is a team of highly successful business brokers that assist business owners in selling their businesses. Emery has directed over 40 mergers, acquisitions and financing transactions. Emery was the #1 Business Broker in the Southeast for Business Brokers Network, America’s Largest Network of Business Brokers, over the past three years.