When I had all the answers…they changed the questions!

Every day the number of people and institutions interested in exploring the vibrant Florida market is increasing. Nevertheless, "not all that glitters is gold", Even in the Sunshine State. To this question that I am frequently asked – What do I invest in, Alfredo? – I usually respond almost invariably with a comfortable “it depends”. From this "it depends" a brief questionnaire is then derived that aims to fine-tune an approach to bring our potential investor closer to their best business alternative.

The first question I usually ask concerns the investment purpose. If it is about supporting the obtaining of a visa, the investment must contemplate the acquisition of productive tangible assets and generate at least three permanent sources of work. In these cases, investment in service companies or real estate assets is not viewed with sympathy by the immigration authorities.

If the obtaining a visa of permanence is not the nerve center of the investment, the foreign investor may develop any type of lawful performance project as long as it does not appear on the payroll or earn a salary.

Once the migratory point has been exhausted, it is important to know what the risk capital available to the potential investor. Contrary to what many think and preach, acquiring a profitable small or medium-sized company does not require large and inaccessible amounts of investment. It is common to find ongoing businesses, with prices well below a million dollars, which generate net profits for the owner of around 20% of sales, with investment payback periods of 2,5 to 3 years.

On the other hand, most businesses within this range are acquired with a down payment ranging from 50 to 80% of the price and the balance through seller financing, from 2 to 5 years, at average interest of 6%. If the investor is a US resident or has US citizenship, he will have access to the financing plans of the Small Business Administration (SBA), which is a public institution that grants guarantees under privileged conditions to qualified companies.

The next important consideration is the managerial ability required, measured in terms of experience within a given line of business. Unlike large companies, in small and medium-sized companies the capitalist and the entrepreneur are usually the same person. For this reason, it is essential to thoroughly evaluate the investor's vocation to remain tied to a project for a certain period and the seller's willingness to teach the buyer everything he knows about the business.

Knowing then the financial potential of the investor and his business inclination it is now possible to identify business opportunities within specific areas of activity. For example, many Latin Americans who consider it interesting to invest in a service station should know that these businesses operate through a concession granted by the oil company that "flags" them. It is the owner of the land and the building who negotiates the terms of the contract with the operator, an essential element being the marketing margin per gallon of gasoline sold.

In general, for a service station to be profitable, it must sell around 100 gallons per month and successfully operate related businesses such as a convenience store, a car wash or a mechanical workshop. In these cases, it must be taken into account that acquiring the business opportunity without owning the property places us at the mercy of the lessor and it distances us from the possibility of negotiating better conditions with the oil operator.

Despite the fact that many entrepreneurs express their aversion to the "smell of food", the food sector is the one with the best margins and the one that requires the least technical knowledge. A healthy dose of goodwill, organizational spirit, and good taste are all it takes to run a coffee shop, deli, restaurant, or convenience store.

If you look at the businesses that have to do with the automotive sector – rubber bands, exhaust pipes and mufflers, window tinting, oil changes, transmissions, etc. – you will see that they are usually busy. If you have a passion for this area do not hesitate to explore exciting business opportunities in progress in which their owners sell due to retirement, health or divorce – the most frequent reasons for sale.

In short, as listing all the business areas and franchises in this short article is an impossible task, I invite readers interested in the subject to express their concerns to me by e-mail or by phone. I will gladly try to guide you based on the experiences that I have personally accumulated in this dynamic market.

Lastly, I would like to emphasize the need for every buyer of a running business -regardless of the branch of operation or the trust one has with the seller- of perform due diligence before the purchase to verify, among other aspects, the status of the accounts, the validity of the permits, the transferability of the lease and the company's position in the market. With this, the buyer will minimize the risk of encountering, when he is already the owner of the business, unpleasant surprises.

Article written by Alfredo Gonzalez, CEO Business in Florida LLC

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