A $4 Billion Problem

by 10 comments
I found this to be really really interesting. There's links on this stuff, but reading is boring so this video sums it up:


Based on the QTY of businesses that actually do sell, this is a problem that presents a HUGE market opportunity.

Based on the numbers in that report, using quick math, I calculate a $4BN market opportunity...

Any ideas on solutions?

Anyone want to brainstorm around this?

EDIT: I ADDED VIDEO FROM MOBILE ORIGINALLY - LINK WAS BAD. SHOULD WORK NOW!
#offline marketing #billion #problem
  • Profile picture of the author Ron Lafuddy
    Bee,

    I couldn't get the video to play, although the darn commercial played fine.
    I did get the report and will take a look.

    Thanks!
  • Profile picture of the author NewParadigm
    It's a huge opportunity but a HUGER problem to solve.

    Why?

    The prep work to properly set up and market a small biz takes a lot of time.

    Often due diligence and prep is pretty much the same amount of work for businesses with revenue of $1-$5million as it is for $20-$100million. So with the smaller business the transaction costs can be very high.

    If one can develop a step by step largely automated system to lead the owner to do much of their own prep that might help. Except how many will take the time to do it?

    Then if a broker steps in to do it, the business does not want to pay the fees to do so.

    It is a dilemma(opportunity) but a really tough one.

    Not to mention the flighty business owners thinking their baby is very special. They are tough to deal with. It's much easier dealing with a public company CFO and buying a $1billion divsion from them. Much less emotional attachment.

    The trick is automating as much of the prep/due diligence as possible to keep transaction costs down.
    • Profile picture of the author TheBigBee
      Originally Posted by NewParadigm View Post

      It's a huge opportunity but a HUGER problem to solve.

      Why?

      The prep work to properly set up and market a small biz takes a lot of time.

      Often due diligence and prep is pretty much the same amount of work for businesses with revenue of $1-$5million as it is for $20-$100million. So with the smaller business the transaction costs can be very high.

      If one can develop a step by step largely automated system to lead the owner to do much of their own prep that might help. Except how many will take the time to do it?

      Then if a broker steps in to do it, the business does not want to pay the fees to do so.

      It is a dilemma(opportunity) but a really tough one.

      Not to mention the flighty business owners thinking their baby is very special. They are tough to deal with. It's much easier dealing with a public company CFO and buying a $1billion divsion from them. Much less emotional attachment.

      The trick is automating as much of the prep/due diligence as possible to keep transaction costs down.

      My guess would be that a prospective buyers' lack of access to capital is THE leading factor.

      If guys have figured out how to lend money to business owners who have 500 FICO scores and tax liens, certainly they can figure out how to lend well qualified buyers money "merchant cash advance" style.

      I see a way where a company can step in and manage owner financed transactions, where perhaps the buyer agrees to basically be accountable to the collections firm. The collections firm arranges and schedules automatic debits from the person bought the business, to the person who sold the business...

      Former owner never has to "wait and pray" for a check to come in every month (only 60% of owner financed transactions are paid in full) because there is someone handling it.

      Preparing the buyer to sell is definitely a key component... Tough one, but if they want out - badly, they'll pay for help getting out I would imagine.
  • Profile picture of the author bizgrower
    All of the cases I have seen where the owner finances, the business goes under rapidly, or the owner has had to take the business back. This has been with hotels and restaurants.

    I suspect most sellers of viable businesses do not want to take the risk of financing and would prefer to get the cash.

    If someone cannot get financing and does not really have the cash reserves to operate a business or get a loan, it's likely a telling sign about their inability to operate a business.

    On the other side of the coin, most businesses for sale seem to be worth nothing more than the current value of the physical assets.

    I think the 80/20 Pareto Principle is really at play here. Not what a business broker is saying.
    • Profile picture of the author vndnbrgj
      Originally Posted by bizgrower View Post

      All of the cases I have seen where the owner finances, the business goes under rapidly, or the owner has had to take the business back. This has been with hotels and restaurants.

      I suspect most sellers of viable businesses do not want to take the risk of financing and would prefer to get the cash.

      If someone cannot get financing and does not really have the cash reserves to operate a business or get a loan, it's likely a telling sign about their inability to operate a business.
      I disagree with this.
      If I saw potential, I would buy every business I came across that offered owner financing. With my marketing knowledge, I could increase the value in a short amount of time. Then, resell the business at a higher valuation and pocket the difference for my time.

      I choose to let the business pay for itself until I cash out.


      EDIT: The video isn't loading for me... ?

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