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In this episode I reply to several emails, I received including one from a gentleman named Murat. So this episode along with the next two episodes are all dedicated to answering a burning question I asked all my newsletter subscribers, where the question was what is the most important issue they are facing today in their business. One of the answers I got most was How to find a suitable and profitable business in their budget.
Though in previous episodes, I touched on this subject before but I went ahead and summarized once again and talked about how you can find the right business for you that is within your budget.
I talk in depth about:
- How to pick the right location that gives you the most value
- How to find out what is the right pricing for the business
- How to use your budget to find the right city and state for your location that gives you the most value
- How to go about finding those businesses
- How to find financing when major banks say NO
- How to do a proper Due Diligence so you know the seller is telling you the truth
- How to do a proper closing so you know no one is taking advantage of you
Just remember it is hard to come up with an exact valuation of business especially when the real estate is not part of the sale. Sellers often go as high as the sky; it is your job to bring them back to the earth not by offering just a lower price but offering a lower price with facts. Facts like comparable sales in the same city with similar sales volume.
Sometimes your dollar can stretch further when you look to buy a business in a smaller city Vs in a big city. One important point to remember, if two stores have identical sales say one is in Alabama, and another one is in Chicago; the chances are that the Chicago store’s asking price is 2-3 times higher than the one in Alabama. Now which one will make you more money? If you guessed Alabama, you are right. Why? Well for a starter, the property taxes are lower, the wages are lower, most of the city, state and county taxes are lower compared to the ones in Chicago. Even most of your utility bills will be lower as per unit cost of power or water is likely to be lower in Alabama than what you will pay in Chicago.
Let’s continue to explore more about this two identical stores since some of the operating fixed and variable cost are lower in Alabama; chances are your bottom line profit dollars are bigger too. Don’t forget the biggest difference here which is your mortgage or rent, which will most likely be 1/3 of what it is in Chicago right? Because the price was 1/3 less in Alabama remember?
The point being, sometimes you can get more for less if you can sacrifice the big city life, in smaller cities your dollar goes further and buys you more. But keep in mind not all stores in a smaller city are profitable, there are bad ones just like there are good ones, you just have to find the right one that fits your needs and budget.
Enjoy the show, and don’t forget to sign up for my newsletter by going to my site at: GasStationBusiness101.com
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