Understanding businesses’ financials is crucial to becoming a good investor or entrepreneur. Thus, it is important to educate yourself on as many opportunities as possible. Having looked at all sorts of business ventures from buying real estate, existing businesses, network marketing firms, online businesses, and creating my own business plans I have seen the importance of understanding the financials. Great, so how exactly do you get to see free business financials?
Where Do You Find Real Business Financials?
There are plenty of websites where you can find folks selling businesses. Whenever someone decides to sell a business they typically prepare the financials. This can take the shape of a Pro Forma or a best-case scenario. Below are websites I utilize to find interesting businesses
- Bizbuysell.com
- LoopNet.com
- the MLS (multiple listing service) for Real Estate
- Zillow.com
- Realtor.com
Once you find find a business or rental property you are interested in, contact the broker or fill out the included Non-Disclosure Agreement (NDA) or Confidentiality Agreement (CA). Then the broker will send you information on the business. As you read through various businesses’ financials you’ll start to learn how different types of businesses operate.
The Lenses You Use to Understand Business Financials
Understand that there are different types of businesses that will be valued differently. A retail business will look different than a services business. Commercial rental property will look different than a franchise opportunity. Utilizing different lenses allows you to start to understand the benefits and challenges of each. By signing NDAs & CAs you’ll get insights into the actual or pro forma (a sunny side view) of how well different businesses operate.
What’s the Benefit?
What analyzing different businesses has taught me is that there are many businesses out there for sale who are not very profitable. There are a lot of real estate deals that don’t make sense. The ones that are easiest to find are often the least desirable opportunities. In order to find quality opportunities, you have to dig deeper.
As you look at more business opportunities you’ll get better at analyzing deals and seeing how different companies report financials. It is great at starting to see trends in why one business is valued higher than another.
Take-Aways from Analyzing Deals
There are a lot of opportunities for people to become business owners. Often there are serial entrepreneurs who fly under the radar because the companies they create are not your behemoth Black Swans like a Facebook or an Apple. They are strong companies with good fundamentals, just very scaled-down. Their upside is limited, as a single restaurant can only serve so many patrons a day. Yet they can be more stable as everyone must eat to survive. Assuming the location, quality, etc. are up to par that restaurant can be a valuable asset on the road to financial freedom.
You’ll notice that Visas are listed as available through ownership, which leads me to believe that many resident non-US citizens purchase these smaller companies for Visa purposes. I wonder how this affects the proportion of US citizens who are business owners versus those who are non-US Citizen business owners.
Analyzing business financials is a key skill that I am incorporating into my routine. Doing so allows me to better understand how various businesses function. The more you understand the better you’ll be able to spot differences and separate the bad deals from the great deals.
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