Many people dream of going into business for themselves, but in Hawaii, in 2018, what does it take to make that leap? We get some of the answers from PBN editor-in-chief A. Kam Napier.
A look at the numbers will remind you that most business in the islands is small business. In 2017, the median asking price for a business up for sale was about $216,000. The median revenue was $240,000 per year, the median cash flow, about $112,000.
Unless you’ve socked away a quarter-million bucks however, your first step would be to look into financing. Jane Sawyer, district director in Hawaii of the Small Business Administration says the SBA’s loans to buy businesses usually want you to put 10 percent down. You can take up to 25 years to pay back a loan on the land and equipment, and up to 10 years to pay back money for working capital.
Working capital is essential, and yet many first-time business owners fail to take it into account, according to business broker Jim Mayfield of Island Business & Commercial Brokerage. We’re talking about the money a business has to put forward to get a job done before they get paid. General contractors are a perfect example, fronting the value of the labor and materials for weeks or months before the client pays for their work.
Another thing unique to buying a business, compared to say, a house, is the risk. If you’re being financed by a bank, for example, your lender may want to see the seller of that business extend some financing to you as well, to mitigate their risk.
And all that is just the beginning. Expect business ownership to change your life. Says Mayfield, “When you own your own business, for better or for worse, you are in control of your own life.”