“How much money do you need to buy a business?” This is one of the questions that most buyers have as they begin their search for the “Perfect Business.” The interesting thing is that they are very hesitant to ask their intermediary this basic question. In the modern, internet connected world, people are used to finding the answer to most questions with a Google search. They are also accustomed to being able to look up the details of whatever they want to buy to ascertain the price, down payment, shipping costs and who has the best deal right online.
Because businesses are unique, it is very difficult to compare them apples to apples. Not only will the same business type, generating the same cash flow, differ in price based on location and other factors, it will probably vary in the amount of cash down necessary to buy it.
So what is the simple internet quick answer? As a general rule of thumb, your down payment (liquid cash on hand to invest), should be equal to what you expect the business to make in one year. For example, $50,000 down on a business that is cash flowing $50,000 per year is reasonable. With various financing arrangements, it may vary somewhat, but that is a pretty good idea of what you can expect.
My best advice to you is find a good business intermediary, and be honest about how much cash you have to put into a business. Then work to find something that you would enjoy owning, that will provide a reasonable return on your down payment, and make good use of the skills and experience that you bring to the table. The professionals at Emerald Coast Business Intermediaries can help you through this process!