Why start a business from scratch, when you can take over an existing one? there’s a big difference.
There are several reasons why someone might want to buy an existing business instead of starting their own, including:
Cash flow, Customers, Financing, Brand Reputation and Risk to name a few.
cash flow & grow
Acquiring an existing business that already has customers and cash flow, can help you grow your cash flow, returning your investment sooner than a startup.
Leveraging the businesses existing customers is a simple way to up sale and resell more products and services immediately. The infusion of new customers will rapidly increase profits and business value. The initial investment can also be 5–25 times more expensive to acquire a new customer than to retain an existing one.
secure more with an established financial track record
It can be easier to get financing for an existing business than for a startup because lenders can see the business's historical financial performance.
limit risk with brand recognition
An existing business already has an established brand and market presence, which can save time and money that would otherwise be spent trying to grow the brand. Customers are also more likely to trust and do business with a well-known brand that has a positive reputation. Buying an existing business can be less risky than starting a new one because the business practices are already streamlined and employees, vendors, and suppliers are familiar with the business.
Scaffolding Services Business
My 2 Cents: Scaffolding rental is a great boring business, and in this company’s market around the New York City area, one that will always be in demand. This company offers a range of scaffolding services, including a proprietary monorail system that significantly reduces project time and costs, for a diverse clientele of contractors and developers. I like that they are a full-service company, handling everything from the initial permitting and engineering phases on through to project completion. There are definitely other players in the space, but it seems like they’ve carved out a nice niche by offering blue chip service catered for smaller projects. I also like that they have employees who have over a decade of experience, so you should have tons of support in the transition. Given this business depends on providing physical scaffolding, I’d want to know the value, quality, and condition of their equipment. I’d also want to dig into how they get new business, the split in their work between new construction and other scaffolding needs, who their usual clients are, who they see as their direct competitors, and whether they subcontract out their work when they have more demand than they can fill. Scaffolding, almost by definition, involves important safety concerns, so I’d also want to be sure I understood all licensing and insurance requirements. While all the equipment is included in the asking price, the real estate where the company is located is also for sale if a buyer is interested. It all adds up to a really interesting deal.
Location: Queens County, New York
Asking Price: $6,000,000
EBITDA: $1,501,889
Revenue: $7,719,976
Established: N/A
Speciality Aluminum Enclosure Business
My 2 Cents: This business makes pool and patio screens and other specialty aluminum enclosures for commercial and residential customers throughout Florida, an ideal location as Florida’s year-round nice weather means there’s a lot of need for sun and bug protection solutions. For this type of business, reputation can go a long way in differentiating you from your competitors, so I like how this company has built both strong name recognition and a steady customer base. I also really like that they already have a fully built out website and social media presence with a 4.4 Google rating. It’s great not to have to build these things out from scratch when you take over as a new owner, and the solid online rating could be important for future digital marketing efforts. I am curious to know if they do everything from quoting and designing to manufacturing and installation. If they do manufacture their own products, I’d want to know the capacity of their facility, its current utilization rate, and if it could support expansion or if more equipment is required. I’d also want to understand how much of their business is driven by direct sales to consumers versus providing products to contractors, if there is any repeat business, and what their competition looks like. There is a solid experienced team in place, but I'd want to check on what the current owner does and what might be needed to replace them. Finally, I’d want to know if there are any license requirements and, if so, who would need to hold them. At the end of the day, though, it’s hard to go wrong with a screen business in the Sunshine State with its booming population and development.
Location: Martin County, Florida
Asking Price: $4,000,000
EBITDA: $1,150,175
Revenue: $6,439,443
Established: 2016
Sewer Service Business
My 2 Cents: This business provides sewer engineering, maintenance, and rehabilitation services for federal and state governments, city public works, and construction industries. These are great clients to have, and with the industry being so niche and the barriers to entry being so high, I assume their 48 active contracts are very sticky (as seen in most of their revenue coming from repeat clients). I like how the revenue has grown by 30% in recent years and that they have a current backlog of $19.7M in projects that they expect to complete in 2024. One thing I would want to check, though, is whether they are dependent on a few key clients. I’d also want to know how new projects are won, how the bidding process works, what standard contract terms look like, whether there are any major competitors, and if all their work is specific projects or if they are also an approved vendor for clients and called on for work when needed. Given its importance to their operations, I’d finally need to understand what their licensing requirements are and what is involved in keeping these current. Otherwise, with a staff of 57 that includes many highly experienced managers, this is a deal you’d be able to immediately profit from.
Location: Columbia, Maryland
Asking Price: N/A
EBITDA: $1,481,210
Revenue: $8,461,904
Established: 1985
3 Dry Cleaners
My 2 Cents: Dry cleaners are a great cash-flowing business, as they are easy to operate, have consistent revenue, repeat clients, and don’t take a lot of investment to maintain. This particular 30-year-old dry cleaner operates out of one central plant with two additional drop off locations, while also offering pickup and delivery services, which is nice because it means they aren’t solely dependent on the traffic that comes through their main processing location. Given the importance of accessibility and convenience to getting and keeping customers, I’d want to see if any of their locations are under or overperforming as well as what their pickup/delivery routes look like. I’d also want to understand what drives business and the role played by organic search, online reviews, walk-bys, and pre-scheduled routes. Finally, I’d want to know what the competition looks like, what the condition of the equipment is, and whether they have any recurring B2B business. If that all checks out, then depending on the capacity of the cleaning plant, there could be a ready way to boost sales by expanding pickup/delivery routes or opening more drop-off locations and by setting up recurring cleaning schedules with businesses like restaurants and hotels.
Location: Kings County, New York
Asking Price: $1,300,000
EBITDA: $650,000
Revenue: $1,359,000
Established: 1994