Buying an existing business for an E-2 visa can be attractive for a very practical reason: you have real numbers to look at.
Instead of trying to predict how a brand-new company might perform, you can review what the business has actually done. There may already be customers, employees, equipment, tax returns and several years of financial statements.
In fact, this is one of the reasons some prospective E-2 investors discussing acquisitions online say they prefer an existing business. They like having an operating history and documented profits rather than starting completely from scratch.
But once you buy the company, those historical numbers belong to someone else’s period of ownership.
Your business plan needs to explain what happens next.
Imagine you’re considering buying a landscaping company that has been operating for several years. The seller generated $750,000 in revenue last year with a certain number of employees and a relatively stable customer base.
That’s valuable information. We absolutely want to see it.
At Visa Business Plans, one of the first things we want to understand when evaluating an existing business is its financial history. We review the available financial information before we start thinking about where the company could reasonably go under the new owner.
But we don’t simply take last year’s revenue, add a percentage every year and call that a five-year projection.
We need to talk to the buyer.
What do you plan to do differently?
Maybe you’re buying the landscaping company specifically because you see opportunities the current owner hasn’t pursued. You may want to increase marketing, add commercial accounts, purchase another truck and crew, or expand into services the company doesn’t currently offer.
Now we have something to work with.
If those changes are expected to take revenue from $750,000 to $1 million, we can start examining what needs to happen for the additional $250,000 to materialize. We can also look at whether more equipment, employees and operating expenses would come with that growth.
The seller’s history gives us a starting point. The buyer’s strategy helps us understand where the business is supposed to go from there.
This becomes even more important when the historical numbers aren’t great.
An E-2 investor recently discussing the purchase of an existing restaurant online was dealing with exactly that situation. The restaurant had been operating for approximately five years but apparently had not been profitable. The investor was trying to understand how to approach the acquisition.
From a business-plan perspective, we’d want to understand something even more fundamental: why wasn’t the restaurant profitable, and what will the new owner do differently?
Maybe food costs were poorly controlled. Perhaps labor was too high, the concept needed to be repositioned, or the restaurant wasn’t doing enough volume for the location.
If the new owner’s plan suddenly shows a profitable restaurant with substantial growth, there needs to be a reasonable explanation for the turnaround.
This is where historical financial information becomes extremely useful rather than inconvenient.
It gives us something to compare the projections against.
USCIS recognizes the purchase of an existing business as one type of E-2 investment. Its guidance on marginality focuses on whether the enterprise has the present or future capacity to generate more than enough income to provide a minimal living for the investor and family.
So if an existing company already has a financial history, we shouldn’t pretend that history doesn’t exist.
At the same time, history doesn’t dictate the future.
A new owner may bring more capital, different experience, new relationships or a completely different growth strategy. Those changes can materially affect what the company looks like over the next five years.
Our job at Visa Business Plans is to understand that transition.
We look at what the business has actually done, talk with the investor about what they intend to change, research the industry and market, and then develop projections that connect those pieces in a way that makes sense.
That also gives the investor something much more useful than a spreadsheet filled with numbers that increase every year.
If someone asks why revenue is expected to grow, there is an explanation. If the plan shows additional employees, there is a reason the business expects to need them. And if future profitability looks significantly different from the seller’s historical results, we can explain what the new owner intends to change to produce that improvement.
Buying an existing business gives an E-2 investor something a startup doesn’t have: a track record. That history gives us valuable information about what has worked, what hasn’t and where the new owner’s projections are starting from.
From there, the business plan can tell the much more relevant story: what the investor plans to change and how those changes are expected to affect the company over the next five years.
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The information provided in this blog is intended solely for informational purposes. While we strive to offer accurate and up-to-date content, it should not be considered legal advice. Immigration laws and regulations are subject to change, and individual circumstances can vary widely. For personalized guidance and legal advice regarding your specific immigration situation, we strongly recommend consulting with a qualified immigration attorney who can provide you with tailored assistance and ensure compliance with current laws and regulations.
Visa Business Plans is led by Marco Scanu, a certified coach from the University of Miami with a globally-based practice coaching Fortune 1000 company executives, entrepreneurs, as well as professionals in four different continents. Mr. Scanu advises clients on turnaround strategies and crisis management.
Mr. Scanu received a bachelor’s degree in Business Administration (Cum Laude) from the University of Florida and an MBA in Management from Bocconi University in Milan, Italy. Mr. Scanu was also a Visiting Scholar at Michigan State University under the prestigious H. Humphrey Fellowship (Fulbright program) with a focus on Entrepreneurship, Venture Capital, and high-growth enterprises.
At present, Mr. Scanu is the managing partner and CEO at Visa Business Plans, a Miami-based boutique consulting firm providing attorneys and investors with business planning services in the areas of U.S. and Canadian immigration, SBA loans, and others.
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