Analyze before Acquiring

The climate for purchasing a business is similar to the region’s downtrodden housing market. Like homes, a large number of businesses are for sale, but financing and negotiations make it difficult to finalize deals.

Fewer purchases are taking place than two years ago, says Guy E. Whitesman, a stockholder and practice area chair with Henderson, Franklin, Starnes & Holt, P.A. in Fort Myers.

“In some respects, it’s like a housing market,” he says. “People have less confidence that there’s just going to be a general increase in the size of businesses that they purchase or profitability of businesses they purchase.”

Some sellers are not realistic about their pricing, and buyers are looking for bargains, which are keeping sides apart. “They want to sell their business for what it was worth two years ago or three years ago, when it was still clipping along,” says business broker Mike Pfeffer, who is aware of 400 to 500 businesses for sale in Southwest Florida.

Jim Straza, owner of Fort Myers-based Business Brokerage Solutions, says fewer deals are taking place because there aren’t many businesses in good financial shape for people to purchase.

“To find a quality business is very difficult. To obtain financing that can make sense is the other obstacle,” he says. “You’ve got two sides of the coin and neither side is very easy today.”

Marc Wagner, who in June purchased Naples-based Franklin Cleaning and Maintenance, a pressure-washing, janitorial and home-watch business, found it took time to secure the right deal.
“At the moment, there are a lot of not-too-good businesses out there which are for sale,” he says. “Of course, there’s always a reason why they are for sale, and you have to find out.”

Wagner pursued buying a business after moving from Germany to Southwest Florida, a longtime vacation destination for his family. He searched for a car-related operation to fit with his background in his family’s tire shop and auto-repair business. He found one, but negotiations were halted after the landlord drew up a new lease with ridiculous terms, Wagner says. He restarted his search and bought the cleaning business.

After lengthy due diligence, four rounds of negotiating resulting in about 15 percent off the asking price, and financing it himself, he closed on the company. Getting to that point took several months for Wagner, who plans to add services and employees this year while branching out to key markets such as German customers.

Local experts say to consider five key points when buying a business.