Me and a couple partners are about to submit an LOI for an insurance company. What are some things specific to the industry we should look out for?
For reference, the company generates around $15mil in rev annually and will probably be selling for around $2m (financed by a loan). I won't know any more specific details until I get the memorandum.
Pretty much what this dude said, 19 year old college student here with literally no business knowledge, don't even know what the fuck a memorandum is but I can tell you that 15 MM profit is BS.
My mother always told me, if it's too good to be true, it probably is. Listening to this would of saved me alot of hard lessons in life.
I'm just saying, this sounds kind of fishy. No matter how good of a relationship you got, get legit papers, research everything, know what you're getting into, because this just sounds really fish unless this dude loves you like a son and just wants you to be rich, in which case why not just give it to you.. Idk man, just seems weird.
GL, might be the best investment you could ever make.
A memorandum is a ~50 page document that contains audited (by a 3rd party) financial statements, industry analysis, costumer details, etc. Pretty much everything you'd want to know about a company.
I'm not worried about being screwed, since I will eventually have all the details before the purchase. My main concerns are if the financials are true, if there's a catch (very possible), or if one/a few customers are responsible for a major portion of their revenue.
That's not to say don't listen to your mother, though. She's a smart woman.
Not much to say until you get us the nitty gritty.
2M purchase say at 10% cap rate is 200k/year profit. thats 1.3% of revenue. business loan what 5% or thereabouts, 100k per year.
from what I think about insurance its a capital intensive business, with tight margins, so everything seems about right.
Generating 15M in revenue is a lot of work for 100k per year.