Lending Library

The U.S. Small Business Administration offers a few different real estate loans to help business owners purchase, renovate, and build properties that support their companies. There are two primary SBA commercial real estate loans to choose from: the 7(a) loan and the 504 loan. Each one is designed for different purposes and has its own terms and eligibility requirements. Read about both options so you can pick the right one for your small business. 

SBA 7(a) loans.

SBA 7(a) loans are a versatile source of funding for small business owners that can be used for real estate. Here's how they work.

Eligibility

For-profit companies that meet the SBA's definition of "small business" may apply for a 7(a) loan. In addition to demonstrating the need for financing, the owners must be financially invested in their companies and have tapped into other resources before applying—including their personal assets.

When using an SBA 7(a) loan for real estate, you must meet the following occupancy requirements, depending on the loan purpose:

• Existing real estate purchase: Property must be at least 51% owner-occupied
• New real estate construction: Property must be at least 60% owner-occupied

Use of loan funds.

SBA 7(a) loans can be used for a variety of reasons, such as working capital, inventory, and debt refinancing. For real estate-related financing, you can apply to use the funds for any of the following:

• Purchasing or leasing land
• Improving street or parking
• Purchasing, building, or improving a building

Repayment terms

Small businesses may borrow up to $5 million with a 7(a) loan, with payments spread out over up to 25 years. Interest rates are based on the current prime rate, plus an additional percentage ranging from 2.75% to 4.75%. You'll also need to make a down payment, which is set by your lender in your loan offer. This ensures you have a vested interest in keeping up with your loan payments over time.

SBA 504 loans.

504 loans from the SBA are designed to help with large asset purchases, including real estate. It has a few key differences when compared to a 7(a) loan.

Eligibility

Small businesses can apply for the 504 loan if the business has a tangible net worth of under $15 million and has had an average net income of under $5 million (after federal taxes) for the previous two years.

The 504 loan comes with the same owner-occupancy requirements as the 7(a) loan: existing real estate purchases must be at least 51% owner-occupied, while new construction must be at least 60% owner-occupied. 

Use of loan funds.

504 loans can be used for purchases, construction, or improvement projects. Eligible projects include:

• Purchasing existing buildings or land
• Purchasing or building new facilities
• Improving or modernizing existing facilities, land, streets, utilities, parking lots, and landscaping

Repayment terms

With a 504 loan, you can borrow up to $5 million for most purchases, or up to $5.5 million for eligible energy efficient or manufacturing projects. These real estate loans come with a 25-year repayment term. Interest rates are tied to the five-year and 10-year U.S. Treasury issues, with a pegged rate above the current rate. 

The business owner is typically responsible for 10% of the costs as a down payment. Another 40% is borrowed from a Certified Development Company (CDC), and the remaining 50% is borrowed from a bank or credit union.

SBA 7(a) vs. 504 loans.

Both the SBA 7(a) and 504 loans can be used for real estate, however each has its own different perks and drawbacks. While the SBA 7(a) program offers broader versatility in how funds can be utilized without necessitating specific job creation or community development criteria, the SBA 504 loan program may provide advantages such as the possibility for greater loan amounts and more favorable interest rates.

See a full comparison between the two loan types here.

Which SBA real estate loan option is right for your business?

Choosing between the SBA 7(a) and 504 loan programs for real estate purposes depends on several factors unique to your business needs and objectives:

• Type of real estate purchase: If you're looking to purchase or refinance owner-occupied commercial property, the 504 loan offers benefits specifically tailored for real estate projects. However, if the property acquisition is part of a broader business financing need, the 7(a) might be more appropriate.
• Project size and scope: For larger projects that significantly contribute to local economic development, the 504 program is designed to support major investments in real estate and equipment. Smaller or more general real estate needs may be better suited to the 7(a) program.
• Loan terms and interest rates: The 504 loan program typically offers lower interest rates and longer repayment terms, especially for real estate purchases, making it a cost-effective option for substantial long-term investments. Consider your business's capacity for repayment when choosing.
• Down payment requirements: The down payment for a 504 loan is usually lower than that of the 7(a), making it more accessible for small businesses with limited upfront capital but solid growth potential.
• Economic development and job creation: If your project will contribute to job creation or meet specific public policy goals, the 504 loan provides not just funding but also potential community development benefits, which could influence your decision.

Evaluating your business's financial needs, growth projections, and the specific requirements of each loan program will help you make an informed decision about which SBA real estate loan option is right for you.

How to qualify for an SBA real estate loan.

Qualifying for an SBA real estate loan involves several key steps and criteria that potential borrowers must meet to be eligible for financing. Whether you're considering a 7(a) or a 504 loan, the basic qualifications include:

• Business size and type: Your business must meet the SBA's size standards, which vary by industry. Generally, it should be a for-profit enterprise and operate within the United States.
• Creditworthiness: Applicants should have good credit scores and a history of financial responsibility, both personally and in business. The SBA and lenders will review your credit history, including your business credit report and personal credit score.
• Down payment: While down payment requirements can be more favorable for SBA loans compared to conventional loans, borrowers should be prepared to make a down payment. The specific amount varies, with 504 loans typically requiring at least 10%.
• Operator requirement: For most real estate loans, the SBA requires that the business occupies at least 51% of the property for existing buildings or 60% for new constructions.
• Financial statements: Applicants must provide comprehensive financial statements, demonstrating the business's profitability and sustainability. This includes balance sheets, income statements, and cash flow projections.
• Business plan: A detailed business plan must be submitted, outlining the business's objectives, market analysis, management team, and how the loan will be used to support growth and stability.
• Collateral: Although the SBA offers a guaranty on the loan, borrowers are still required to provide collateral, which can include business assets, real estate, and personal guarantees.

Meeting these qualifications does not guarantee loan approval, but it is the first step in the application process. It's essential to work closely with an SBA-approved lender or a Certified Development Company (CDC) for 504 loans, who can provide guidance tailored to your business's unique needs and help you prepare a strong loan application.

How to apply for an SBA real estate loan.

Applying for an SBA real estate loan is a comprehensive process that requires careful planning and preparation. Here’s a step-by-step guide to navigating the application process effectively:

1. Determine eligibility: Before applying, ensure your business meets the SBA’s eligibility requirements for either the 7(a) or 504 loan program. This includes size standards, the nature of the business, and creditworthiness.
2. Choose the right program: Based on your business needs, decide whether the 7(a) or 504 loan program is more suitable for your real estate project. Consider factors such as the type of real estate, project size, and interest rates.
3. Find an SBA-approved lender or CDC: For a 7(a) loan, you’ll need to work with an SBA-approved lender. For a 504 loan, you’ll partner with a Certified Development Company (CDC) alongside a third-party lender. Consult the SBA’s website or contact your local SBA office to find approved partners.
4. Prepare your documentation: Gather all required documents, including financial statements, a business plan, ownership and affiliate business information, and any necessary legal documents related to your business and the real estate transaction.
5. Complete the application: Fill out the loan application forms provided by your lender or CDC. Make sure to complete every section accurately to avoid delays in processing.
6. Undergo a loan review: After you submit your application, your lender or CDC will review your documents and may request additional information. This review process will assess your project's viability, creditworthiness, and adherence to SBA requirements.
7. Loan approval: If your application is successful, you will receive a loan approval decision from your lender or CDC. This phase includes discussions on terms, rates, and any closing conditions that must be met.
8. Closing: Once all conditions for the loan are fulfilled and approved, you will proceed to closing, where the loan documents are signed, and the funds become available for use according to the terms of the loan.

Remember, each SBA real estate loan application is unique, and the process may vary slightly depending on the lender, CDC, and specific circumstances of your business and real estate project. It’s advisable to seek guidance from financial advisors or consultants experienced with SBA loans to ensure a smooth application process.

Learn more about how SBA loans can help you grow your business and increase your efficiency.

If you can’t beat them, buy them. And even if you can beat them, maybe still buy them. 

When it comes to the top dogs, we’ve seen successful competitor acquisitions like Facebook buying WhatsApp, T-Mobile acquiring Sprint, and Amazon purchasing Zappos. But we’ve also seen other not-so-successful competitor acquisitions like when Sprint bought Nextel or when Google acquired Motorola.

When the giants fall, it makes a big bang. However, most of these behemoth companies are still alive and kicking.

For small businesses, the margin of error is much thinner. An acquisition flop doesn’t usually end in a setback—it ends in layoffs and bankruptcy.

But if you get it right, wow, can your small business hit the jackpot. You could score customers, increase revenue, accelerate growth, win top-notch employees, and ultimately secure a more concrete piece of the market.

If you’re considering buying out a competitor, a few critical questions have likely come to your mind. Should you buy out a competitor or crush them instead? If you decide to buy them out, how will you finance the acquisition? What will you need to do to make sure the acquisition ends up a major success rather than an epic fail?

All great questions, and that’s why we put together this definitive guide to buying out a competitor. Read through this guide, and you’ll find all the answers you need to make the best acquisition decisions for your business.

Why should you buy a competing company?

Any merger or acquisition is risky—so why should any business gamble with it?

Well, with great risk comes great reward. Here are a few reasons you might want to buy out a competitor:

• Reduce competition. With the competitor gone, your customers have one less alternative. You won’t have to keep lowering your product prices or paying more in pay-per-click (PPC) bidding wars. You may be able to raise prices for your products (without upsetting customers), or the economies of scale might reduce costs and allow you to lower prices while maintaining a profit.
• Acquire a competitive advantage. If your competitor has intellectual property, digital marketing leverage, or prime real estate that gives them an advantage, you could buy the company and all the assets. This way, you won’t have to use employees and money to build the technology yourself, compete for digital prowess, or fight for locations.
• Accelerate growth. Organic business growth can be painfully slow. By acquiring a company, you could double your revenue, customer base, and team overnight. 
• Grow your team. If your competitor has a group of stellar engineers or salespeople, acquiring their business could get the dream team on your side (if they decide to stay, that is).
• Expand your customer base. Acquiring your competitor gives you instant access to their customer base. If your product is a complement, then there are tremendous cross-sell and up-sell opportunities.

The disadvantages and challenges of a competitor buyout.

Buying out your competitor isn’t all unicorns and rainbows, though. There can be significant challenges and downsides.

Before you rush into anything, be aware of these potential backlashes:

• Loss of key employees. Founders, leaders, and other tenured employees may use a buyout as a catalyst for an exit. You’ll need to have worst-case-scenario plans and resources ready to replace them. The acquired business likely heavily relied on these key players—you can’t just go with the flow if they leave.
• Increased debt. Buying out a competitor isn’t cheap. You’ll likely need to borrow money (sometimes a lot of it), and that will affect your profitability and capacity to invest in other areas of your business.
• Integration conflicts. Integration struggles are real. Some integrations will come Day 1, and others will roll out slowly over months and years. Keep in mind everything that will be impacted: software, personnel, salaries, benefits, processes, offices, titles, culture, and the list goes on. 
• Broken processes. A company’s go-to-market strategy or product road-mapping process may work for their business and employees but not work somewhere else. If you buy out a competitor, make changes very slowly. Forcing a new acquisition to operate exactly as the parent company could break what they’ve built. If it ain’t broke, do you really need to fix it?

None of these consequences should stop you from buying out your competitor, but they are factors you should keep in mind.

When to acquire a competitor.

Deciding to acquire a competitor is a significant strategic move that can redefine your company's future. It's a decision that should be based on a combination of timing, financial stability, and market position.

Timing

Timing is crucial in the acquisition process because it can significantly impact both the cost of the acquisition and its ultimate success. Engaging in acquisition when the market is favorable, such as during an economic downturn when company valuations are lower, can allow for a more cost-effective expansion. Conversely, acquiring a competitor when your company is experiencing robust growth and market share can solidify this leading position, preventing competitors from gaining ground. Additionally, timing can influence the integration process, where market stability can offer a smoother transition and better acceptance from customers and stakeholders.

Financial stability

Financial stability is crucial when acquiring a competitor because it ensures that the acquisition does not jeopardize the acquiring company's existing operations and financial health. A strong financial foundation allows a company to absorb the costs associated with the acquisition, such as the purchase price, integration expenses, and any unforeseen financial challenges that may arise. It also positions the company to leverage additional resources for growth opportunities and to manage the debts more effectively, maintaining investor confidence and market stability throughout the transition period.

Market position

Market position holds critical importance when acquiring a competitor, acting as a litmus test for the potential success of the merger. A strong market position can afford the acquiring company greater leverage in the integration process, enabling it to maximize the benefits of the acquisition, such as expanding its customer base, enhancing product or service offerings, and eliminating a competitive threat. Furthermore, a company with a solid market position is better equipped to weather the integration challenges, such as brand cohesion and customer retention, ensuring that the acquisition contributes positively to its long-term strategic goals.

Top 5 questions to ask before buying out a competitor.

Buying out your competitor could establish you as the top dog, or it could send your business spiraling out of control.

When the timing is right, the most critical factor is not if you should make an acquisition, it’s who you should acquire. Just like when you open a restaurant menu, you don’t want to start salivating over the first thing you see. Especially if you’re at Cheesecake Factory—you have a whole book to read first!

If your industry and market resemble a Cheesecake Factory menu, you’ll want to take your time and consider the options. When dining, there are usually good, better, and best possibilities. When acquiring a competitor, there’s likely a good, bad, worse, and worst option.

To make sure you make the right decision, weigh these 5 critical factors first:

1. What do the financials say?

We’re not just talking about current revenue and expenses. Dig deep into the numbers.

Numbers help you detach emotionally from the acquisition to take a more objective approach. Don’t fear the numbers—embrace them!

Your competitor may be boasting some impressive figures, but a more in-depth look into the financials might reveal that numbers are trending down in the past few years. Or maybe you notice the business is profitable, but expenses are accelerating faster than revenue growth.

You’ll also want to examine the cost of the acquisition. Will your competitor’s revenue offset the price of buying them out? Do they currently have any expensive debts? How long will it take to recoup the cost and start seeing a profit?

Finally, you’ll want to make sure the numbers the business provides are legit. “I’ve lost a lot of money on acquisitions in the past by not making sure that their books, sales, and other systems match up,” said John Rampton, founder of Due. “Have a firm go in and audit everything. Then audit it yourself. Any company that doesn’t allow you to take a look at everything and take the engine apart isn’t worth your time.”

2. How will the customers react? 

Imagine if Pepsi bought Coca-Cola or if Microsoft acquired Apple. How do you think legacy customers would respond? Not well. Not well at all.

Even if all the numbers add up, you’ll still need to consider the emotional impact on customers and employees. Direct competitors, like Nike and Adidas, will have a more difficult time converting customers and employees. Indirect competitors, like YouTube and Vine, would face less of a challenge.

“I like to think about my company and our acquisitions as many chapters in a detailed overarching narrative,” said Rob Fulton, founder of Exponential Black Labs. “Does it make sense to the customer, and do our products and acquisitions flow from one chapter to the next?”

Make sure your competitor’s customers and your customers will be on board with the acquisition. The last thing you want to do is add jet fuel to another competitor’s marketing fire.

3. Do the company culture and values fit?

Typically, when companies look at acquisitions, all they think about is money, money, money. But meshable culture has financial value, too.

Take BerylHealth, for example. A private equity firm tried to acquire BerylHealth for 9x its EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortization). CEO Paul Spiegelman declined the deal, but he left with a firm resolve to improve his company’s culture. His focus and investment in culture paid off—2 years later, a company offered 22x the EBITDA to acquire BerylHealth.

“We were able to sell our culture,” said Spiegelman. “They weren’t buying us just for the business we had or the platform we would build for them; they honestly believed in what we had built.”

When you look to acquire a competitor, make sure you’ll be able to integrate the 2 company cultures. If it’s a sizable acquisition, you won’t get away with forcing the acquired employees to fit your mold—you’ll need to reevaluate and realign to make sure the culture fits the new combined business.

Be thoughtful and intentional with this process. “Most leaders want to complete the integration process as quickly as possible in order to reap the financial benefits of the transaction,” said Debbie Shotwell, Chief People Officer at Saba. “This can come back to bite them. I believe in taking a step back, planning, and taking your time with your integration strategy.”

4. Why is the company willing to sell?

If the owner is experiencing a major life event (illness, relocation, retirement, divorce, etc.), then it makes sense to sell the business. If that’s not the case, why are they willing to sell their business?

There are right and wrong answers.

If the company believes in the combined vision and future of your business, then that’s a good reason. If things are slipping and they’re looking to abandon ship, that’s a scary reason.

You need to know precisely why the business is willing to be acquired so you can avoid any unpleasant surprises down the road.

5. What is the market overlap?

You want to acquire a competitor with as little overlap as possible. Your competitor’s clients chose an alternative over you once already, and they may decide to go with another company instead of sticking with you post-acquisition.The best target for an acquisition is a competitor in nearby markets instead of the same market. This play allows you to expand your market rather than force your product or service on customers.

How to finance a small business acquisition.

It’s (almost) never a good idea to buy out a competitor with cash. Business acquisitions are a pricey business. You don’t want all your working capital thrown at the investment, especially after a buy out that will require additional integration costs. 

So, where will you find the money for the acquisition? You have a few options:

• Your business’s capital. Like we said before, it’s not a great idea unless you have mountains of cash sitting idly in the bank.
• Seller financing. The business you’re acquiring provides you with a loan that you pay back over time.
• Small business loan. You find a business acquisition loan to finance the buyout.
• Leveraged buyout. You leverage the new business’s assets to help finance the acquisition, but you’ll usually need to pair this with a loan or seller financing.

As America’s leading marketplace for small business loans, we’re a tad biased, but we believe a business acquisition loan should be one of your top financing considerations.

Using a business acquisition loan.

A business acquisition loan is pretty straightforward—it helps you buy an existing business or franchise.

No stacks of cash, crazy-rich uncles, or convoluted financing schemes required. There isn’t a “business acquisition loan,” per se, but there are small business loan products that work perfectly for acquiring businesses. Here are the top 4 options.

1. Business term loan.

Business term loans are the classic financing you think about when you hear the word “loan.” You get a lump sum of cash that you pay back with predictable monthly payments, usually at a fixed term and a fixed interest rate.

2. SBA 7(a) loan.

With an SBA 7(a) loan, you could get up to $5 million in financing for whatever your heart acquires. Contrary to the name, the government (Small Business Administration) does not actually lend the money—they just guarantee all or a portion of the loan to decrease the risk for lenders.

3. Startup loan

If an opportunity to buy out a competitor arises but you don’t have years of business experience under your belt, a startup loan may be your best bet. They’re not too different from term loans, but they’re offered by lenders who are willing to accept borrowers with lower revenue, credit scores, and years in business.

4. Equipment financing

In some situations, the purchase price of the business you’re acquiring might be majorly determined by the value of the equipment you’re purchasing. When that’s the case, equipment financing should be a top consideration. Plus, you get to use the equipment as collateral for the loan, so there’s less risk for you.Fortunately, you don’t have to go from bank to bank inquiring about all these loans to find the best deal. Just use our free 15-minute application, and our nifty sci-fi algorithms will find you the perfect business acquisition loan with the perfect lender. Simple, quick, free—the way it should be.

How long does it take to buy out a competitor?

The timeline for acquiring a competitor can vary significantly based on a range of factors, including the size and complexity of the deal, regulatory hurdles, and the negotiation process. Generally, smaller acquisitions can be completed within a few months, while larger, more complex deals may take a year or more to finalize.

The initial stages of the process involve preliminary discussions and due diligence, which is critical for assessing the target company's financial health, legal standing, and operational fit. Following this, the negotiation of terms and the drafting of contracts can span several weeks to several months, depending on the parties' agreement speed and the deal's complexity. Regulatory approvals, a crucial step, can also extend the timeline, especially in industries that are heavily regulated. Throughout this period, maintaining open communication and a clear strategic vision is essential for both parties to facilitate a smooth transition and integration post-acquisition.

Tips to make your business acquisition a success.

Despite being long and painful, the actual transaction of buying out your competitor is just the first step in a successful business acquisition. That’s not to say you can’t pop the champagne and enjoy the victory (you earned it!)—just know the hardest part comes next.

Once the bubbly starts to fizzle, it’s time to get back to work. To make sure your business acquisition doesn’t end up like poor ol’ Motorola (who?), follow these post-acquisition tips:

• Have capital on hand. Don’t drain all your money on the acquisition—you’ll need capital for everything that comes next: integration, onboarding, travel, rebranding, legal fees, and so much more. If you don’t have one yet, go ahead and secure a business line of credit to deal with additional expenses and any surprises. 
• Communicate, communicate, communicate. When it comes to acquisitions, there’s no such thing as too much communication. Make sure employees, customers, and stakeholders are all on the same page. Get these communications prepared, reviewed, and revised in advance so you’re ready to go on Day 1. Take the initiative and provide answers to predicted FAQs as soon as possible.
• Integrate slowly. Don’t rush into forging one team immediately. Take things slow. Let the teams and businesses continue to operate independently at first. Then, begin to roll out changes gradually. Sometimes, complete integration isn’t necessary—don’t force anything. You acquired your competitor because they’re doing something right—don’t break it.
• Study the culture. After the acquisition, take some time to analyze the culture of the business you bought. What’s going right? What’s going wrong? “It’s important to understand and respect that regulations and processes are in place because they have led to success in the past,” said Glen Willard, franchise owner of River Street Sweets. “Develop a plan that includes how your suggested changes or improvements will benefit the business as a whole, and take it to the top.”

Ready to buy out your competitor?

Now that you know what to expect from a business acquisition, how are you feeling? Are you confident about your decision to acquire a competitor?

If not, don’t worry. You’ll never be 100% sure of the outcome. That’s the life of a small business owner—always weighing risk and reward.

While you can’t guarantee a flawless acquisition, you can do everything in your power to set your business up for success. Take your time and do it right—a top-notch competitor acquisition could change the course of your small business forever.

It’s important to have people in our lives who we can turn to for advice. Examples include business mentors, trusted friends, religious leaders, therapists, or family members. Sometimes we already know what we want to do and are just looking for confirmation. Other times, we are clueless and legitimately need direction.

When facing 2 diametrically opposed options, the guidance of others becomes even more crucial. It’s reminiscent of the classic song from The Clash:

Should I stay or should I go now?

Should I stay or should I go now?

If I go there will be trouble

And if I stay it will be double

So ya gotta let me know

Should I cool it or should I blow?

Should I stay or should I go now?

If I go there will be trouble

And if I stay it will be double

So ya gotta let me know

Should I stay or should I go?

We often find ourselves in similar situations. Should we keep our day job or quit? Should we discontinue a struggling product or try to rescue it? Should we expand our office space or work with what we already have?

The situation is heightened for entrepreneurs because of the level of personal investment. You have spent a lot of money and dedicated countless hours to your passion. So you want to make sure you’re making the right decisions and protecting everything that you’ve already sacrificed to get where you are today. And that gets tricky when you get conflicting advice.

“Though it’s known that you shouldn’t listen to all criticism and advice you receive as an entrepreneur, how do you respond when your trusted advocates, mentors, and investors give you conflicting advice?” asks small business expert Tori Utley. “It can put you in a difficult place as an entrepreneur with much to question and consider. It’s helpful to have mentors that will help you navigate the uncertainties of startup and professional life while giving you meaningful insight when you need it most. But when insights from equally qualified, equally invested, and equally credible people start to conflict, it’s you, the entrepreneur, who must ultimately make a decision.”

How to handle conflicting feedback.

Trust us—there will be crucial moments in your business career where the advice you receive couldn’t be more different. Here are some tips for managing the contradictions so you can find the best possible way to move forward:

Take time to reflect.

OK, you’ve received feedback that seems to conflict. Start by allowing time to process the various insights. You might even realize that you’ve misinterpreted some of the feedback and that it is more complementary than you originally thought.

Get a third, fourth, fifth, and sixth opinion.

The funny thing about a stalemate is that it can quickly turn into a landslide victory. Suppose you talk to 2 trusted advisors and get differing opinions. The situation might look dire, but if you talked to 3 other folks and they all agreed with 1 of the original opinions, you could take this near-total consensus as the ultimate green light.

Test the advice.

When possible, it can be helpful to test the advice you get. Let’s say that 1 adviser tells you to go all-in on social ads for your product launch, while another adviser says that display ads are the only worthwhile option. Rather than toss 1 of these advertising tactics, do a series of small tests and find the winner.

Look for the reasons behind the advice.

There will be times when you might be surprised by a differing opinion from 1 of your mentors or colleagues. Take a step back and consider why they feel the way they do. A person’s background and circumstances shape their views, and you might realize that the advice is less relevant to you in this particular situation than advice from another source.

Stay true to yourself.

Your gut has gotten you this far, so don’t tune it out now. It’s essential that you gather insights from respected sources, then follow through on the action that feels best. Nobody on earth understands your business better than you, so it stands to reason that you should be the ultimate decision-maker.

Embracing the beauty of conflicting feedback.

It can be understandably frustrating to get contradictions when all you want is a clear sign pointing you in the best direction. But it’s important to have differing opinions in life because they introduce you to new ways of thinking and challenge your assumptions.

Your small business needs insights to thrive, not an echo chamber. So be sure to always seek out feedback and opinions from your team of trusted advisors. As long as you use proper evaluation strategies and then follow your gut, you’ll be able to lead your business to a brighter tomorrow.

We have around 773,000 franchise establishments in this country—but what’s the draw for small business owners?

Let’s look at it this way: say, for instance, that you’re a novice entrepreneur. Would you rather start a business from scratch or place your bets on an established operation? Many people just starting out would choose the latter. 

But franchises aren’t only for budding entrepreneurs. They’re for everyone: people looking to make more money, established entrepreneurs who want another source of income, or retirees who want to contribute to the workforce. Anyone can benefit from all that franchises have to offer. 

Advantages of buying a franchise.

Building a business from the ground up takes hard work and time. You have to set up everything yourself—your own processes, protocols, and procedures. You’re in charge of everything, and that comes with great responsibility: not only do you own every win, you also own every loss. And with this from-scratch model comes many hours of trial and error. 

A franchise opportunity gives you all the advantages of a business without having to start it yourself. You get the chance to utilize all the hard work and established processes that someone else has developed, which minimizes your risk. And the franchise’s whole package gets handed to you: a proven business model, brand recognition, a stream of customers, and continual support. 

But every franchise is not the same. If you’re considering buying a franchise, here’s what you need to look for in an establishment:

• Industry growth potential. Look beyond the current state of the industry and examine future projections. Will the industry continue to grow or remain stagnant?
• Strong support system. What type of ongoing support—if any—does the franchise provide?
• Good management. Make sure the franchise has the right strategies, plans, systems, and processes in place. 
• Adequate earnings. Consider if the projected income you will receive matches what you want or need. 
• Satisfied franchisees. Talk to other franchise owners to gauge their level of satisfaction. 

Best franchises for under $10k.

Want to be a business owner but don’t want to break the bank? Read on for our top franchise picks that you can acquire for $10k or less. 

1. Momleta

This franchise is a great opportunity for fitness-passionate moms. If you love staying in shape and want to help other moms get in shape, Momleta may be the franchise for you. 

Unlike other sports franchises, Momleta doesn’t require a startup investment of well over $10,000—initial fees fall between $4,000–$7,000. This franchise is also under the Baby Boot Camp brand and includes several programs and fitness classes. 

2. Social Owl

If you enjoy working from home and would love to help small business owners succeed, you could consider opening a SocialOwl franchise. SocialOwl makes it possible to start your own social media marketing business. This franchise is unique because the model includes a SaaS (software as a service) starter pack. 

With this franchise, you’d work with local businesses to sell social media packages. Access to training, marketing materials, and your own branded website are all included for low investment fees of $179–$249 per month. Average ROI is also worth noting: according to SocialOwl, you can make around $300 a month per client. 

3. Building Stars

A Building Stars franchise will give you all the tools you need to build a successful cleaning business. They also offer training and ongoing support programs to help you sustain your franchise. 

Their focus is on commercial cleaning solutions for office buildings—a $117 billion industry that’s continuing to grow because of the COVID-19 pandemic. The total investment required for this opportunity ranges from $2,245–$8,295. 

4. Jazzercise

Another great opportunity for fitness buffs is Jazzercise. Their program makes working out fun and exciting: their dance-based, full-body routines will get you moving to popular music and help you whip others into shape. 

After applying to join the program, you’ll receive training over a 5-week period. At that point, you can choose to become a Jazzercise instructor or a small business owner. The total investment to own your own franchise falls between $2,415 and $3,200. 

5. Complete Weddings and Events

Complete Weddings and Events is the largest event-services provider in the United States. If you enjoy organizing events, planning, and making schedules, this may be the franchise for you. 

It’s also worth noting that the wedding industry took a dip due to the pandemic. Pre-COVID, the industry generated $72 billion per year. But since then, it’s taken a tremendous hit—in 2021, it’s expected to generate $51.2 billion.

Now that the country is reopening, however, people will be planning more in-person weddings and other celebrations—and they’ll no doubt need the help of professional event planners. 

Complete Weddings and Events will give you all the training and ongoing support you need. They’ll also teach you how to price your services and hire other professionals, like photographers, DJs, and videographers. Startup costs are around $10,000. 

Franchises under $10k in 2024.

If you want the freedom of entrepreneurship but cringe when you think of everything that goes along with it—like building a business from scratch, growing your company, and marketing your brand—then you’ll probably benefit from a franchise. And if you can get in for $10k or less, your risk decreases even more. 

Before you buy a franchise, weigh all the pros and cons and consider if it’s worth it for you. $10k may not seem like a lot of money to some, but it’s unquestionably a substantial amount. And you want to maximize your investment regardless of how much it costs. 

When you choose a franchise, ensure that your chosen franchise model is a stable, quality organization who will offer you ongoing support—not an establishment that only reaches out to you when it’s time to collect your franchise fees. 

$10k may not be enough to buy into one of the most popular franchises, like McDonald's, Great Clips, or Anytime Fitness. But it’s enough to purchase a good franchise that will teach you, train you, and bring you a positive return on your investment. 

Balance sheets make up the core of bookkeeping. These financial records track every credit or debit for your business, noting them under assets and liabilities. Assets refer to anything that is useful or has value to the business (like cash on hand or inventory). Conversely, liabilities refer to anything that will cost the business money in the long or short term.

Tracking liabilities is important for any business that wants a clear picture of its cash flow and company value. This guide will discuss what liabilities are in greater detail and how you can record them. 

What’s the difference between a liability and an expense?

A common mistake in bookkeeping is that your liabilities are the same as your costs—but this isn’t the case. Liabilities are used to acquire assets for your business. Meanwhile, expenses are payments for items or services without physical value. 

Consider the difference between a business mortgage payment and an electric bill. Paying the mortgage each month increases your asset: equity on the building or land. However, an electric bill merely covers the service of electricity used within that period. You don’t get to keep the electricity or potentially resell it. 

In double-entry bookkeeping, each liability is also listed as an asset so the business owner can track the value of the business. Their business equity can grow by paying liabilities. 

Short-term and long-term liabilities.

Along with sorting expenses and liabilities on your balance sheet, you will need to differentiate between long- and short-term liabilities. Simply put, long-term liabilities are obligations that the business expects will continue for over a year. These can include loans and mortgages. 

Short-term liabilities (also called current liabilities) are likely to get paid off within a year. They cover payroll tax and sales tax payable, along with the monthly payments you make on loans and mortgages. 

Documenting both short-term and long-term liabilities can help business owners to better understand their equity growth over the course of a year. 

What are some examples of liabilities in bookkeeping? 

Businesses have liabilities in all shapes and sizes. There are long-term liabilities that companies keep on their records for years, as well as short-term liabilities for new equipment. A few examples of liabilities include:

• Wages payable: The amount of accrued income that employees have earned. If a company pays its employees every 2 weeks, this section will change dramatically throughout the month. 
• Interest payable: When you buy an asset and owe interest on your payments, you record the outstanding balance as a liability. 
• Accounts payable: Unpaid invoices that have been submitted to your business. 
• Dividends payable: The amount owed to shareholders who have stock in the company. This often includes a percentage of a business’s profits each year or quarter.   

Every business will have liabilities in some form. Even if you operate as a sole proprietor from your home, you will likely have costs related to equipment, materials, and a mortgage or rent. If you can build up good habits for tracking these costs on a small scale, you can grow your business without getting overwhelmed by your bookkeeping. 

Is it time for a career change? Do you have a unique skill set in a niche field but want to expand your knowledge into something new? 

Many entrepreneurs started out in their fields and saw opportunities outside of the norm. They made dramatic changes in their career plans and took risks to enter new and lucrative markets. This could be you. 

Below are a few unique business ideas that rise to customer demand. Get inspired by the entrepreneurs who turned their off-the-wall ideas into big business, and see if any of these concepts would work for you.

1. Dog event planning.

Is your dog the apple of your eye? Do you want to help others celebrate their pooches and spoil them in the most creative ways possible? Consider getting into canine event planning. 

A few years ago, event planner Niki Sohrabkani took on a client who asked her to throw a party for 20 dogs and their pet parents. Sohrabkani had such a good time that she developed her own business to throw parties for pets. Today, the party planner hosts more than 30 events a year, from “pooch pool pawties” to “Howl-o-ween bashes.” 

Sohrabkani really leans into the puppy theme, catering for humans as well as the furry attendees. She always brings some “pawsecco” and leads games like “musical paws.” 

The parties are popular with high-end clientele who want to spoil their pets. Sohrabkani’s attention to detail means her events get featured across Instagram, attracting additional clients and helping her grow her unique event-planning business.

2. Online dating consulting.

Countless people worldwide have downloaded apps like Tinder, Coffee Meets Bagel, and eHarmony to meet their next potential love matches. However, the world of online dating can be just as fraught as traditional meet-ups, which is why some romance experts have turned their passions for helping friends get hitched into lucrative businesses. 

Sameera Sullivan is a New York City matchmaker and runs a service called Lasting Connections. Sullivan offers online dating consultants and assistance to help people meet potential significant others. Lasting Connections is on the high end of the online dating consultancy spectrum, charging $45,000 for a year of in-depth coaching or $6,500 for 3 months of a virtual coaching program. Some coaches offer by-hours services at $99 each. 

An online dating coach will help you create a profile—and some will choose photos and write your bio for you. Some services will filter matches for you (so you don’t have to see any rude or gross messages) and help you dress for upcoming dates. 

If you have a matchmaking knack, consider taking your business digital by getting into consulting. 

3. Edible insect production.

Are you looking for a low-calorie source of protein that doesn’t harm the environment? Consider cricket protein, which uses food-grade insects to provide post-workout snacks for gym-goers across the world. 

Insects are considered an environmentally-friendly food source because they require less space and resources to grow. Compared to how much land and water products like wheat and beef take up, insects require much less and produce a yield much faster.  

As more people realize the health benefits of eating insects, entomophagy startups are flourishing. Companies grow and sell everything from trail mix and protein bars to restaurant-grade scorpions and ants for Michelin-starred restaurants.

Get to know more about these “entopreneurs” and the niche they fill.    

4. Modern day funeral planning.

The funeral as we know it is changing. People no longer want their loved ones crying over their bodies in a church or stodgy funeral home. More people are requesting celebrations of life and unique burials that provide memorable send-offs for families. 

Alison Bossert, a celebration-of-life planner in Los Angeles, shared how she threw a “Memorialpalooza” for a client in 2019. The client, Jerry Seinfeld’s personal manager, was celebrated with 300 guests at the Sony Pictures Studios—there was catering, gift bags, a line-up of speakers, and even Seinfeld himself as the closer. This event was meant to be more of a party to honor the dead rather than a somber affair. 

Consider stepping into the world of modern-day funeral planning as more people request unique burials, parties, holograms, and other special ways to celebrate life.

5. Snow shipping

Do you live in a place with too much snow and want to get rid of it? You’re not alone. The company Ship Snow Yo will send 20 lbs or 50 lbs of real snow across the country to give you a winter wonderland wherever you are. Send snow to your relatives in Florida who are bragging about the mild winters, or order a snowman kit for yourself. 

This company highlights how you can take a seemingly undesirable resource and turn it into a valuable product. 

Every successful business starts with an idea.

These business owners prove that it doesn’t matter what your business idea is. If you have a strategic business plan and know-how within your industry, your concept can thrive. Take the first steps today to turn your off-the-wall idea into a success. Check out our funding opportunities to get your small business off the ground. 

Starting a business is expensive and entrepreneurs are always looking for ways to save money. Here are some free resources and services that will help you grow as a business and a businessperson.

US Small Business Administration.

Some of the best free resources for small business owners in the United States are actually offered by the government–the US Small Business Administration (SBA) has tips, articles, studies, and even granting opportunities. The agency’s business plan worksheets are fantastic for those just starting up or those seeking another round of funding. For those with more experience, the administration offers free business counseling for entrepreneurs at any stage. The granting and loans feature of the SBA should merit special consideration–it is likely your business is eligible for some sort of funding offered by the SBA.

Coursera and other free online courses.

Any entrepreneur will tell you that education never stops, even after you receive an MBA. We live in the age of the MOOC–that is, “massive open online course.” Institutions from MIT to Stanford offer free courses online, and they’re open to anyone. Of course, the classes aren’t typically credited, but the information is often from real professors. Thousands of business courses are available at Coursera, Udacity, edX, and other MOOC platforms. Most courses consist of video lectures and worksheets. Because of the online community aspect of the digital classrooms, you may also find yourself networking with other entrepreneurs across the globe.

Networking and meetup.

No matter what your business, networking is critical. You should seek out gatherings of entrepreneurs–the SBA and your local Chamber of Commerce can be great resources to find out about small business owner happy hours and other get-togethers. An easy online resource for finding ways to meet other entrepreneurs in real life is Meetup–there is likely a whole group dedicated to entrepreneurship in your city. You can even set up your own gatherings through Meetup, Eventbrite, or Facebook.

Google Maps

Having a curated presence on Google Maps is crucial for any physical business. You can edit your business’s contact page through Google–you can insert images and update contact information. It is important that this contact information on your Google Maps page–your phone number, website, and address–is up-to-date. Google Maps also has a Click To Call tool that you want to ensure is accurate. This tool enables users taking advantage of the popular Near Me feature, and it is a way to drive customers to your door who didn’t even know of your existence before looking you up on Google Maps.

Google My Business.

Similar to updating your information on Google Maps, you should complete a page on Google My Business. This page ensures that anyone searching for your company receives accurate information. Beyond addresses and phone numbers, you can input your hours and add information like menus. Having a complete Google My Business page can give you an SEO (search engine optimization) advantage–Google ranks websites with complete Google My Business profiles higher in web searches.

Yelp for Businesses.

Love it or hate it, Yelp is a force in the small business universe pretty much no matter where you are. The company has options meant to allow participating small businesses to stand out, though. Yelp for Business Owners allows you to highlight good customer reviews, reach out to previous customers, engage new ones, and offer special deals to Yelp users.

WordPress for websites and blogs.

Even if you don’t consider your business to be a web-based company, it is required to have an online presence. If you don’t have the budget for a web designer right now, a great option is WordPress. It is intuitive to use and the free templates are handsome–it is also a great way to nab a cheap domain name. You can build a simple website for free, and if you want to go a step further, e-commerce and other small business resources are available from WordPress for inexpensive annual fees.  

Gmail

If you already have an email account through Gmail, it might seem too obvious to mention that Gmail is one of the best free resources available for small business owners. It offers 15 gigabytes of free storage and is deeply ingrained with other business features from Google. You can easily label, filter, and prioritize your email inbox, and Gmail allows you to send out pre-written responses to commonly asked questions. For marketing and outreach, you can make lists of your contacts–such as “return customers” or “potential new clients”–and push out your messaging tailored specifically to these lists.

Google Drive for sharing with a team.

Once your Gmail account is set up, you should take a deep dive into Google’s G Suite options. Google’s Calendar is legendary for its ability to be shared, and Google Hangouts allow you to set up video calls easily. It may seem basic, but Google’s Docs, Sheets, and Slides features are some of the most powerful free business tools out there–they allow you to create documents, spreadsheets, and presentations and then share them with anyone you want. Again, it all comes with 15 gigabytes of free storage.

Doodle for scheduling.

The name is childlike, but Doodle is a free and accessible tool for scheduling. This tool is especially useful if you have a team of, say, busy freelancers who barely have an hour to spare. You can request the availability of the entire team for a few weeks at a time. Even better, the respondents can fill out a Doodle within a few seconds–no sign-ups or logins are required.   

Your state's small business agency.

Along with the SBA, your state government likely has a massive number of free resources for small business owners–your tax dollars at work. Each state has a small business development center, sort of like a miniature SBA. Along with letting business owners figure out what sort of permits or registrations are required, these departments often have educational information or funding opportunities. The SBA has links to these agencies in every state.

SCORE educational and mentorship resources.

The nonprofit SCORE has a bunch of resources for small businesses across the country, from online workshops and podcasts to free mentorship opportunities. Especially if you’re a budding entrepreneur, gathering information from the trifecta of the SBA, your state small business agency, and SCORE should be one of your first steps.

BPlans.com for business plan templates.

Business planning documents are necessary for several reasons. Any bank or grant opportunity will want to see this paperwork. On a more fundamental level, business planning documents are good for you to see and work through what your company’s future looks like. BPlans.com has a server full of business plan templates, all for free, that span dozens of industries. The website also has other helpful features, like how to develop your elevator pitch.

Crowdfunding platforms

Depending on the nature of your business, crowdfunding platforms like Kickstarter or Indiegogo can be a great way to start raising capital. You can essentially start selling a product before your inventory is stocked. These platforms are free in the sense that it is free to set up–they will take a fee from the money raised. If your business is more content-based–if you are a blogger, artist, or subscription box creator, for instance–take a peek at Patreon, too.  

Canva for graphic design.

Especially in this age of websites, graphic design is in high demand. If you don’t have much in your budget, Canva is a free option that is easy-to-use even for the technology-impaired. The service offers templates for digital graphics like Facebook cover images or email graphics, as well as printable options like flyers or posters. Other free graphic design programs include Spaces, which makes creating logos a snap, and Piktochart, fantastic software for creating fetching infographics or flowcharts.

Mailchimp for email marketing.

Once you’ve created your graphics, you’ll want to send them out to your customers. Mailchimp has terrific free options for small businesses, making email marketing intuitive and beautiful. You can send up to 12,000 emails messages to 2,000 subscribers for free. Mailchimp even offers analytical help–you can check open rates and other data so you can get a handle on what sort of email campaigns work best.

Slack

Slack is now the gold standard for inter-team communications at firms big and small. It is far less unwieldy than group text messaging and allows you to create different channels with different users. You can easily send around pictures, links, and files. Slack is also a secure way to direct message individuals in the team.

Legal help from Docracy.

When it comes to legal matters, you probably shouldn’t be solely focused on saving money. However, if you are just starting out, Docracy is a free resource full of sample contracts and other legal document templates. While you will still probably want to hire an attorney to review everything, it is a good starting place. Docracy allows you to digitally sign and share documents for free, too.

Quick—when was the last time you calculated your business’s profit margin?

If you answered “Last week,” excellent! And if you don't remember, you’re probably way overdue.

But were your numbers good or bad? Every company is unique, so the yardstick you measure your profit margins against isn’t the same one your neighbor uses. What's considered a “good" range varies across industries—restaurants average a slim 6–8%, whereas the advertising and public relations industry averages a more generous 11–20%.

That means your answer should probably be, “It depends.” Here’s why.

What are profit margins?

Profit margins are key performance indicators that can help you make strategic decisions to keep your business profitable and healthy.

To go deeper, we cover various different profitability ratios here, including how to calculate them and what their purpose is. The 3 most commonly used are:

• Net: essentially shows a company’s bottom line
• Gross: can indicate how well strategies like a price increase are working
• Operating: can show out-of-control expenses

So what’s the difference between a profit number and a profit margin? Profit numbers show a dollar amount—e.g., a $5 profit on an item sold. Profit margins are a percentage that allows your number to be compared against industry averages and competitors or to reveal trends within your own business.

For example, imagine a bakery wants to know if 2 desserts are equally profitable. The calculations for this example are:

• Gross profit = net sales – cost of goods sold (COGS)
• Gross profit margin = (gross profit / net sales) * 100

Both desserts generate a $5 gross profit per unit. However, vanilla cake has a much higher gross profit margin. That kind of insight might influence whether pie stays on the menu or suggest that social media promotionsshould market the cake.

What should your profit margin be?

Once you've calculated your profit margin, how do you know if it's good or bad? In other words, what should your profit margin be? The answer is—it depends.

According to the Corporate Finance Institute, the average net profit for small businesses is 10%, while 20% is considered good. But your mileage may vary depending on a variety of factors.

For example, a company’s size and life stage can heavily influence profit margins. It wouldn’t be reasonable to expect a mom-and-pop retail store to have the same profit margin as a monster retailer like Walmart. Big companies have more leeway for spreading out or reducing costs through automation than small businesses.

Seasonality can significantly alter your margins, too. No one would expect a ski resort's summertime profitability margins to resemble the values calculated during a snowy winter season.

The economy can also shift what’s normal for an industry—consider the hotel industry's profit margins during the COVID recession. During the shutdown, some hotels improved their gross profit margin by eliminating room service or reducing housekeeping. But their net profit margin, which included mortgage or rent on a commercial building, probably wasn’t even close to normal.

And each industry's typical profit margin range depends on its COGS and operational needs. Think about the difference between a restaurant, a dental practice, and an independent technology consultant—their revenue and expenses are vastly different. Restaurants tend to have high COGS, as meal preparation requires perishable ingredients. The dental practice’s expenses include costly X-ray equipment and malpractice insurance. The technology consultant would most likely have the lowest operating expenses of all 3, as labor would be its main expense. Thus, these businesses' “normal” net profit margins aren’t comparable to each other.

You can find industry averages in various online databases, via your favorite trade association, or even by asking the research librarian at your local library—and you can use those ranges, along with knowledge of your own business’s variables, to judge if your margins need improvement.

Remember, however, that profit margins fluctuate and can be impacted by market conditions. The margins in this chart were calculated in January 2022, during a period of higher-than-normal (8%) inflation.

How to improve your small business's profit margin.

Now that you’ve completed the calculations for your business, how can you increase your profit margin?

Every business can increase net profit margin (their bottom line) by either increasing revenue or decreasing expenses—or perhaps both. The trick is to understand the business impact of pulling each lever. Will your margins improve more if you raise your prices or negotiate lower pricing with your suppliers?

For example, a restaurant impacted by rising inventory costs could charge more for each item. But their customers are price-sensitive, so they may choose to reduce expenses instead by cutting portion sizes.

On the other hand, a consulting business could reduce expenses by modifying internal workflow processes. Suppose a senior consultant spends 5 non-billable hours a week inputting timecards and expenses. In that case, those tasks probably need to be automated or assigned to a lower-cost data entry clerk to minimize labor costs.

Why should you care about your profit margin?

Numbers are great, but do they really matter? Short answer: yes. Tracking your profit margin can help you to make plans and decisions based on facts, not gut-feel. Scoring a new client can make you feel flush with cash—but only a review of your profit margins will tell you for sure. Remember our dessert example from earlier? Not all profits have the same value.

Monitoring profit margins also helps you work towards your financial plan. It’s similar to a New Year’s resolution to lose weight: after a week-long cruise vacation, a weigh-in might be a reminder to eat healthy again, but your 6 months of historical weight tracking shows that your long-term plan is working, with only a slight hiccup post-vacation. Profit margins do the same thing for your business—they allow you to make course corrections in the short term while providing context in the overall big picture.

Profit margins may also be a factor in certain types of small business financing, and a potential lender may review a business’s profit margin before making a decision, especially for more conventional loan products, like a term loan. While the borrower’s ability to service the requested debt is paramount, current debt service and profit are also important to the equation.

You're in charge of your profit margin.

Take steps to calculate and monitor your profit margins regularly. With some minor tweaks to revenue or expenses, you might find your profit margins soaring from okey to outstanding.

*Disclaimer: The information provided in this post does not, and is not intended to, constitute business, legal, tax, or accounting advice and is provided for general informational purposes only. Readers should contact their attorney, business advisor, or tax advisor to obtain advice on any particular matter.