Acquiring my first business!
Hello everyone!
Ever since I stumbled upon the world of small business' around 3 months ago, I have been obsessively researching day & night, and have come to the conclusion that I would like to embark on the journey of becoming an entrepreneur! Back in mid November I came across several businesses across various industries, and this one established landscaping business that has been in operations for almost 19 years ended up catching my eye. To give you some background on myself, I worked as an Engineer in NYC for about 4 years. Ultimately got burnt out from that line of work (primarily due to the company/company culture) and ended up leaving that job. I have always thought about the idea of owning a business, but never knew I could make it a reality up until this point. Luckily for me, I was living at home at that time, and had saved up ALOT of money during my time working as an engineer, and so I decided to invest my all of my money after I left my job, and surprisingly, after taxes and everything, I was able to walk away with $500,000USD that is currently just chilling in my bank account. Now the plan for me is to use a small(ish) portion of this money as a down payment towards the potential business that I am interested in acquiring. I found this small business on one of the popular online websites and the details that were provided to me on the listing are as follows:
Asking Price: $750,000
Cash Flow (NOI): $295,821
Gross Revenue: $1,056,237
From my understanding, the typical multiple these types of businesses within this particular industry go for are around the 2-3x SDE/EDBITDA mark. Also, from what I was able to gather online and from other sources is that if the business is primarily operator-owned, then you would want that multiple to be ideally closer to the 2x mark, otherwise, if there is already a fully operational staff in place ready to handle the day to day operations without your presence there as the owner, then you are looking at more of a 3x valuation (someone please feel free to correct me if I am wrong)
A few more things to note about the business. Seller is exiting the business primarily due to retirement. They also stated in their ad that they are open to partial retirement by establishing some form of a partnership where the previous owner would take on less responsibilities alongside the new owner. Seller also mentioned in their ad that the business is "SBA Pre-Qualified!" (yeah yeah I know, there is no actual SBA pre approval of any kind that I know of. I assume they meant that they had an SBA lender look over the business financials and basically told them it qualifies for an SBA loan) They are also offering seller finance and said they would carry a note (seller has not stated any terms for this so I am assuming this is open to negotiation).
From everything I mentioned above, and assuming this is a great deal and everything checks out, would you guys still negotiate the price down a bit? especially if you are wanting to structure the deal in a certain way?
This is going to be my very first business acquisition and just my first time taking on anything of this size in my life, and I am very nervous (in a good way I guess lol) and just want to make sure I am not way in over my head here. If you guys were in my shoes right now, what are the exact steps you guys would start to take to get the ball rolling on making this deal come to fruition? Just so everyone knows, I am not looking to replace my old 9-5 job with a new one, I want to buy something where if I took off for 1 week, the place wouldn't go up in flames in my absence LOL
TIA! :)