5 Simple Steps to Review a Biz Listing in Less than 5 Minutes

You’re not a CPA, right? Maybe you’re not even sure what a Balance Sheet is. Okay. You haven’t reconciled your bank account in…decades? I got you!

I always send people to ​bizbuysell.com​ to start looking for businesses to buy. It’s kind of like the Tinder of business buying, swipe left…swipe right… But it’s a great practice ground.

You're scrolling through the website and you see cute puppies for a grooming company and towering pines for a tree trimming business and you keep scrolling and pretty soon they all look alike and you’re dazed and confused and you knew all this business buying malarkey was just a scam. Damn it!

I get it. It can be overwhelming at first. That’s where I come in with my simple-for-everyone-to-use framework. I call it the Rapid Fire Listing Review. 5 simple steps and yes, the calculator on your smart phone. (I even made a spreadsheet to do the math for you, cuz I love you guys!)

​Here​ is a listing I sent to a new business buying friend a couple weeks ago. (LoopNet.com is very similar to bizbuysell.com.) We were sitting in the sun enjoying a couple of lattes. My friend already has a general contractor’s license and a small remodeling company she started earlier this year. (We met at a seminar meant to help people become better communicators. I’m always learning and trying to be better.) She loved the idea of buying a business, of course, thus the lattes and listings.

Anyhow, I happened to pop onto a listing titled “Commercial & Industrial Electrical Contracting Business”. She got excited knowing that electrical contractors are typically more profitable than some of the other trades.

The listing gave us these basic details:

Asking Price: $490,000

Gross Avenue: $642,000

Cash Flow: $212,000

Established: 2011

Real Estate: leased

Employees: 4

Rapid Fire Listing Review

1. Profit margin: cash flow / gross revenue

   • 212,000 / 642,000 = 33%

   • Pretty good (Good does vary by industry)

2. Calculate SBA loan payments

   • $490,000 at 9% over 10 years (no down payment-keep it super simple at this point)

   • Use any amortization app or this ​spreadsheet​.

   • Monthly payment is $6,207

   • Annual payments are $74,484

3. Can the cash flow cover these annual payments?

   • 212,000 > 74,484

   • Yes

4. Can you live on/replace your salary with what is left over?

   • 212,000 - 74,484 = $137,51

   • In my small town, probably so.

5. Multiple: price / cash flow

   • 490,000 / 212,000 = 2.3

   • Decent pricing, depending on factors such as owner dependency, etc.

Any questions? Hit reply and let me know what you got:-) Reply with RAPID FIRE and I’ll send you the quickie spreadsheet to do the math for you.

The Rapid Fire Listing Review is not due diligence and it doesn’t mean this is a great deal, but it is a quick way to determine if the business is worth taking a closer look.

In this case, we signed the NDA, (because I’m looking for a handful of people to buy businesses with) then quickly determined it wasn’t a good fit after all. It wasn’t actually in the town it claimed to be in, the owner is doing all the heavy lifting, and they only have one electrician on staff.

But it could be right for a different buyer. The numbers work on the surface and that’s the point of the Rapid Fire Listing Review. It answers the question of “Is this business listing worth looking into?”

Peace Out!