Why You Should Buy Your Real Estate and How You Can Do It, NOW!

Monte Zwang

You are managing your business every day and hopefully, as you read this you have mapped out your profit plan for 2012.  Based on last year’s performance you should have a good estimate and roadmap showing what to expect this upcoming year in terms of sales, profit, assets, and equity. If you don’t, you should take the time and make a plan now. 

Beyond the end of 2012, what are your plans? How can you manage your future if you don’t have an exit or transition plan?  Is it realistic to think that you want to continue managing this business or performing these services for the next twenty years?   Do you have a picture of how you plan to retire or exit from your business? Passion is one thing, but ambition provides a future.

Know the value your business or practice. The short story is that spas and wellness facilities are valued at somewhere between 3-1/2 times Net Profit and 40% of Gross Sales (not including Gift Certificates). Medical Practices are valued at approximately 2 times Net Profit and 65% of Collected Revenue.  For a business to have value to sell, it must be bigger than the revenues earned solely by the owner. It must show Net Profit which is adequate to service the debt created for the value of the business that the buyer will be paying to you to purchase the business. As I learned a long time ago; No Net, No Debt!

‘Tis the season to buy real estate. Understand the value of real estate in your area. Better yet, understand that the bubble on commercial real estate is about to burst and many markets will be experiencing a decrease in real estate value.  Look around. Are you seeing an increasing amount of vacant space?  How long do you think landlords will allow this to continue until they re-think the rates they are asking for their space? Increasing vacancies means less income which equates to lower value.  If landlords have not managed their cash reserves properly, they may realize that it is in their best long-term interest to sell.

You’re probably saying to yourself “But I don’t have that kind of money!”  You are probably already paying a similar amount in rent compared to the debt service you would be paying if you were buying your space.  Buying your building and leasing it back to yourself will more than likely cost about the same as it does to lease your space from a landlord.  Yes, you will have to get creative and come up with a down payment. The difference is that at the end of about fifteen years, you will own an income producing piece of real estate with positive equity that will be worth more than it is today.

There is strength in numbers. Don’t try to do this alone.  Look around you.  Are there other tenants in your center who could be interested in owning a portion of the center or building you now occupy?  Are there other health practitioners, physicians, or wellness businesses that could be doing better if they were situated next to a business like yours?  Could everybody experience more success if all tenants in the center could combine their resources in advertising, reception labor, retail, and back-office administration? Could this make your business more profitable with new opportunities for growth?

Yes, money is available for qualified buyers. Commercial banks are lending and SBA guaranties are available for owner-occupied real estate.  If you know what lenders look for and present a comprehensive and feasible package, there is money out there.  Do not go to a lender until all your ducks are in order and your package makes sense. Lenders want to make loans, and money is available if they feel comfortable with the risk and financial strength of the borrowers. Are you a qualified buyer?

There is power when you join hands and work together. Look into your future and move towards your defined goals with confidence. Maximize the profit potential throughout your business life starting today.

Give us a call.  We provide the experience and guidance to help put this together for you.  As always, the first call is free. Don’t hesitate to give us at 888.727.5489 or e-mail at Monte@WellnessCapital.com.

Our best wishes to you for a happy and successful 2012.

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