Should I Buy a Business or a Franchise?

Want to be your own boss but not sure which way to go about it? Here, you can weigh up the pros and cons to see whether buying a franchise or a business would suit you best:



One of the positives of buying a franchise is the increased number of loan options available to you.

Brand names and a transparent track record of cash flow are preferred by banks and other lenders, so choosing a franchise will make it easier to secure funding. Franchises that have fewer locations may be less attractive to lenders as they have not quite proven the feasibility of the business in all types of environments.

The franchise will often provide information and advice regarding financing the acquisition.

However, unlike buying a business, you will have to pay for the use of their name through your sales (for example, McDonalds charges 5%) and contribute to the national marketing spend.

You will also be asked for an initial franchise fee, and you will need some working capital.


Similarly, success in financing the purchase of a business will be determined by the type of business you want to buy. If you go for a business that has had a rocky financial past, a bank will be more reluctant to lend to you.

One of the slightly more tricky aspects of buying a business is that you should be prepared to pay a larger proportion of the price upfront – around 30 to 50 percent, and be able to finance the rest. However, if you still want to buy a business but don’t have the cash up front, there are several other ways that you can do so.

You could co-op buy the business – maybe with someone else who previously wanted to buy it but didn’t have enough money. Lease with an option to buy is another possibility whereby a down payment is made, enabling you to lease the business as a minority stockholder.

Implementing an ESOP (Employee Stock Ownership Plan) would provide you with capital by selling stock to employees in the business. You could also use the assets of the business to get financing from factors, finance companies and banks…..Continue reading at Should I Buy a Business or a Franchise?

Guest blog post by

Dream Team

Join the VR team as a franchisee and serve the lower mid-market
as an M&A specialist

VR Business Broker Teamknowledgeable and experienced M&A deal team can help facilitate and streamline the business sale process-from due diligence to negotiations to the execution of agreements and other post deal transactions. Becoming a VR Franchisee affords you the opportunity to assist sellers of privately held lower mid-market companies to successfully navigate the selling process and put together a winning dream team that can produce a win-win outcome for all parties.


Choose members wisely

Some of the most important decisions you’ll make in the process concern selecting professionals to help with your M&A deal.  A deal team may consist of financial and
legal experts or you may need to expand the team to include – depending on the
size and scope of the deal and your industry-specialists from fields such as
government and environmental regulation, human resources, risk management,
information technology, and operations. As a VR Intermediary, you will lead the
team, helping to organize and package information from all certifiable sources and
further negotiate the deal.

Your seller’s current legal and accounting advisors may be able to serve on
your deal team and recommend M&A experts to work with you. When evaluating
potential advisors, you will want to consider such factors as their:

  • Experience with transactions similar to yours in terms of size and industry,
  • Success rate with previous clients,
  • Number of engagements handled per year, and
  • Professional affiliations.

Guide your team

Because of increased concerns about fraud, financial misrepresentations
and the profitability of consolidation, many buyers have intensified their due
diligence and are demanding a more qualitative analysis of an acquisition
target. They will be ready to devote time to the information-gathering and
negotiation process.

As your seller comes under intense scrutiny, your team needs to be in place as
early in the process as possible to enhance the value of your seller’s assets
and prepare to support the company’s credibility. Any significant surprises
uncovered by a buyer during the due diligence phase will almost certainly lead
to a reduced offer.

Ensuring that team members understand the goals of a deal is critical. Buyers
need to articulate their consolidation objectives-for example, whether theirs
is a financial or strategic acquisition-and which of the target’s assets are of
greatest interest. Sellers need to communicate their selling price goals and
unique value drivers and outline other issues, such as the protection of
intellectual property and financial information.

Without clear guidance, conflicting views and opinions from the buyer and
seller will affect the outcome of the deal. You, as a trained VR professional
can avoid this by assigning tasks to specific individuals, based on their areas
of expertise. You may end of leading both sellers and buyers into forming
separate  due diligence committees. Comprising company executives and select deal team advisors, you will lead the committee to meet regularly to review the status and progress of the due diligence process.

Know your purchase agreement

Buyer and seller deal teams also will be instrumental during the negotiation process. The teams can help outline the structure of the deal, purchase price, financial terms, integration and any potential “deal killers.”

Once the parties have come to an agreement, your VR deal team will review the
purchase agreement’s terms and conditions along with the seller’s professional
advisors. For example, the team may work through actual conditions that may
arise and run model purchase price adjustments using anticipated inputs, such
as how current assets and current liabilities are defined.

As the team anchor, you  must be prepared to suggest additional stipulations into the purchase agreement to solve issues that will affect the final purchase price, such as a valuation of a piece of intellectual property. Once the purchase agreement is signed, your job as a professional VR Intermediary will continue to work together through any regulatory consent processes and assist, as necessary, with the process of merging finances, operations and other systems. Your VR team will also be
instrumental in ensuring that the terms of the transaction are carried out and
a “time is of the essence” closing event occurs.

Start building yours

The process of buying or selling can create tremendous pressure on buyers and sellers of privately held businesses. As a VR Franchisee, your job is to help ease and manage those pressures to a successful closing event.  Helping buyers and sellers achieve their goal and transition to the next phase of their life is a high calling.  Becoming a VR Franchise is not for everyone.  But for the few who select to go down that road, there are few professions that are as rewarding as assisting buyers and sellers in fulfilling their dreams and ambitions.

Interested in joining VR? Learn more now.

Interested in owning your own VR office? Learn more now.

Creative Deal Structuring


Acquisition talks are proceeding smoothly. Then the subject of price comes up. The buyer thinks the seller’s asking price is based on overly optimistic financial projections. The seller believes the buyer’s valuation of his company is far too low. Is the deal dead? Not necessarily. An earnout agreement can help resolve the dispute when a buyer and seller disagree about the seller’s business prospects. They are especially useful when dealing with the unknown — when the target is young and unproven, or it is emerging from a difficult financial situation. In short, earnouts offer a way for the parties to bridge expectation gaps.

business dealUnderstand the benefits

In an earnout, a buyer makes a partial, upfront payment to the seller. With the payment comes a promise to pay the rest of an agreed-on amount if the target meets certain pre-established goals. Meeting these goals generally results in a higher price for the seller, while falling short of the goals may result in a lower price. A well-designed earnout carries advantages for both parties. For instance, the buyer can initiate a transaction with a relatively modest amount of cash. It also can avoid the risk of paying too much for a company unable to deliver on overly optimistic financial projections. Finally, an earnout can help make the transaction more valuable by significantly motivating the seller to achieve its promised results. The seller, meanwhile, can use an earnout to help negotiate a better asking price. An earnout can be particularly helpful when the seller believes that the company’s future results are likely to be much better than its current ones.

Structure the agreement solidly

Whether an earnout succeeds can depend on how well it’s structured. An ill-considered and vague agreement can turn a dispute over valuation into a dispute about the agreement itself. A common problem is drafting an earnout that covers an inadequate period. When this happens, the seller may try to quickly boost its earnings, even at the expense of the company’s long-term financial health. By expanding the earnout period, the buyer can collect more data to evaluate the target’s financial performance. Many experts say an earnout should reflect at least a year’s worth of results and perhaps as much as three years’ worth. Keep in mind, however, that the seller’s business becomes increasingly influenced by the buyer’s management — setting the stage for finger-pointing if the seller fails to meet the earnout’s terms. The earnout also should include the right measures of financial success. Gross sales figures provide one popular measure because they’re more difficult to manipulate than net sales. Net earnings, though a good long-term measure, are subject to many variables and can be misleading over a short period.

Achieve consensus quickly

Even the best-structured earnout needs occasional monitoring. A good way to keep the agreement on track and minimize the potential for later disputes is to include a provision for periodic audits. Audits help reassure the buyer that the target is using appropriate accounting methods and operating its business professionally. A poorly conceived earnout will fail to achieve a consensus between buyer and seller, who may interpret the same facts in vastly different ways. Thus, earnouts often include a dispute-resolution mechanism, such as arbitration, which can be a less expensive alternative to litigation.

What Buyers Look For In A Business Opportunity

You have built a great business with love and care. It has grown larger than you’d
ever imagined, and generates a nice profit that has allowed you and your family to live
comfortably. Now you’re ready to sell. You assume there’s a buyer out there who will
pay you a fair price and then nurture the company with the same attention you have. What’s more, selling the business is a major part of your retirement plan.

Needless to say, buyers look at businesses differently than sellers. So to achieve the
outcome you want, it’s important to think like buyers and understand how they evaluate a business.

What buyers look for

There are many types of buyers: strategic and financial, individuals, companies, and
private equity funds. Despite differences, all buyers consider how much they’ll invest
to acquire a business, the amount of risk they’ll bear and the potential return on their
investment. To evaluate an opportunity, buyers focus on three major areas:

1. Cost and terms.

What will it take to acquire the business? How much cash and how much debt?
What are the deal’s terms and conditions?

2. Continuity

Will the business continue to operate similarly after the sale? Much of the risk of
buying a company relates to continuity. For example:

_ The current owner has personal relationships with customers, distributors or vendors that the new owners may have to struggle to maintain,

_ The owner has special expertise that is undocumented and difficult to learn,

_ Key personnel aren’t committed to staying, or

_ Offshore competition looms.

Sellers armed with solid responses to these types of continuity concerns are more likely to get their desired price. Even if you don’t want to sell your business for a few years, take steps now to ensure it can run smoothly without your personal involvement.

That independence could be worth millions when you sell.

3. Growth

Are there unexploited opportunities? You may have focused your sales efforts in
one geographic region, but there may be many opportunities to take the
product national or international. A buyer that believes it can increase revenues
substantially will pay more for the business than one that believes the current
owners have already maximized opportunities.

What sellers should do?

It may seem counterintuitive, but the things you may be most proud of can work against getting the best price for your company. Not many entrepreneurs like to boast that their company could run just fine without them or that there are plenty of opportunities they’ve failed to exploit. Yet these may be the very factors buyers seek, along with lower cash requirements. Please call us for help in understanding how to best present your company for sale.

6 Strategies to Surviving a Tight Credit Environment

Tight CreditTightened credit conditions are almost inevitable when the economy slows down. The cost of credit rises and lenders naturally become more risk-averse. There’s no way to get around the reality of tighter credit markets, but certain strategies can help your business survive – and even grow – during the downturn.

Consider these six strategies:

Keep lenders in the loop. Communicate proactively and frequently with your lenders, instead of waiting until you have an urgent need or problem. Keep them abreast of your company’s strategic plans and share your successes. But also let them know as soon as possible about potential issues. Your lenders are likely facing increased scrutiny themselves, and will feel more comfortable knowing you’re keeping them in the loop about how your company is doing.

View the full business article here.

VR Business Brokers Tips – How To Prospect for Businesses For Sale

Knowing How to Prospect Effectively for Businesses For Sale

A successful business intermediary will always meet business sellers and build a strong listing portfolio through using six essential methods of prospecting:

  • Personal call;
  • Telephone call;
  • Direct mail;
  • For sale by owner (FSBO);
  • Referral;
  • Centers of influence (attorneys, accoutants, etc.).

It has been proven that the most effective approach to prospecting is by utilizing a combination of personal and telephone calls with direct mail. The important point to remember when performing this process is the timing and follow-up elements. This is how you will be able to produce results. Selling businesses is not a one-call profession. To be successful, you must do so through multiple conversations with an owner. This is based on the steps of a business owner’s “Ownership Cycle.”

Understanding the “Ownership Cycle”

To correctly prospect, you have to understand that every business owner moves through an “Ownership Cycle.” There are three main phases: Building – focusing on growing the business; Plateau – the business has its momentum; and Selling – deciding to do something different with career.

In each area of the “Ownership Cycle,” you need to determine which phase the business owner is currently in, and when to follow up next. As a business intermediary, you should be introducing each owner to VR as early as possible. This will work beneficially towards both the seller’s and your common goal: a successful transaction.

Every VR office should be fully utilizing their tools available on the VR WebManager (only available to VR Business Brokers).

You can find the professional resources you need to prospect in the following categories when you login:

  • Build your customer base;
  • Build your listing inventory; and
  • Build public awareness.

VR offers extensive training to all of the VR Business Franchise owners. Through the VR training specific methods and techniques on every aspect of being a successful business broker are covered in full detail.

For information on how to open a VR Business Brokers Franchise office, please call (800) 377-8722 or visit Owning your own VR Business Franchise, also visit VR on Facebook  at VR Business Franchise Facebook Welcome page and VR Franchise Facebook Updates.

How To Be A Successful Business Broker

Hundreds of articles, primers, books and opinions have been written on “HOW TO BE A SUCCESSFUL BUSINESS BROKER”.

The basic answer is very simple, it requires working hard and working smart!

Yes, we know everyone considers themselves a “hard worker” as it may very well be, but it really takes hard work and plenty of wisdom and street smarts to be on top of the heap in this business.

Success begins with a plan. It’s important to develop a keen business plan from the start to make sure to stay on the right track to success. After all, you are in your own business as an independent contractor, and how many businesses are you aware of that do not have a definitive business plan. Formulate your plan and diligently work your plan by tunneling your efforts with the right tools and resources made available.

Surround yourself in a work atmosphere that provides a good quality work environment like that found in a VR Business Sales office (see link at end of article). All the resources are readily at your fingertips. Each VR office owner has proven career successes combined with a deep rooted entrepreneurial spirit that create an aura of excitement to be around. If you maintain the same deep rooted enthusiasm and creative deal making skills as the owner with whom you affiliate, your own successes will prevail.

Continually develop strong business relationships and prospect every day. Every person you meet will eventually consider selling or buying a business, when they do, it will be you they think about first. Develop centers of influence and referral networks. Focus on your needs and work your plan to accomplish on what you expect to get out of the business. You will only get back what you put in to the business; work a true forty hours per week and make every minute productive in obtaining listings. Good saleable listings must be kept foremost in your mind by establishing solid criteria of what you and your office are willing to work on. Only work on Sole and Exclusive Listings that are priced right.

Know your success ratios and work your ratios every day. These are good management skills that will pay off in the long run. You should know how many prospecting calls you need to make to attain your listing goals as well as how many buyers you need to speak with to get an offer. If fifty per cent of the offers you write do not go into a contract you are doing something wrong and need to start from the beginning analyzing your practices, work-habits, taking responsibility for your practices. Every two contracts should have a conversion ratio of one closing…Pay Day!

All aspects of the industry must be taken seriously and constant education in your field of endeavor by taking courses and attending seminars. Read anything related to the industry and regularly take motivational and self-help courses. Master negotiation skills and fine tune your skillset. Always do the right thing. Don’t procrastinate, there is no perfect situation.

By preparing for every situation prior to the engagement appointment to first time buyer meetings, you will demonstrate a command of presence for which you will always be recognized. Be a peer to your client and customer contacts, explain in one statement why you are the one to work with and what you bring to the table. Thinking outside the “box” will make you a deal maker standing ahead of the pack as you mature in the business.

Continually pay attention to the basics, be responsive and stick to your objective:

Make money

Meet People

Join Organizations

Ask for Referrals

Contact Sellers Regularly

Delegate as Much Computer Work as Possible

Practice Healthy Living by taking time for yourself and family.

Always think positive, think big and think Valued Representation.

VR Business Sales and Mergers & Acquisitions provides the best opportunity for having a successful business brokerage office of your own.

For more details please contact our Director of Franchise Development at 800-377-8722

or visit