An Advanced Guide To Buying A Business
Buying a business is one of many ways of starting your entrepreneurial journey. You don’t always have to start from scratch. Instead, you can become an entrepreneur by buying a business.
You might be shocked that more than 500,000 businesses change their owners yearly. With multiple industries having many competitors, the number of businesses changing their owners is growing. Many small businesses are changing hands, and you can also buy an existing business and build up on it.
But, starting from finding a business that wants to sell itself to closing the deal is lengthy. So, if you are interested in buying an existing business, then this article may help you.
Checklist For Buying A Business
How to buy a business? I know the question is tricky, and the answer will not be a cakewalk either. But you must have certain experiences and expertise and be ready to ask relevant questions during the purchase.
Here are some suggestions you can follow –
Find Out The Type Of Business You Want To Buy
When buying a business, you need to create a shortlist of things that you are looking for in a specific business. This becomes easier when you know the type of business you want to buy and have interests, passions, skills, and experience in it.
Well, passion alone is not enough when purchasing a business. It would help if you were aligned with the business model, customers, products or services, industry, and trends related to the business you are willing to buy. Having prior knowledge about the business you want to buy ensures the safety and success of your decision.
This is why it is wise to enter the industry you have previously worked in or the business you are associated with. You have both the knowledge and experience of running the business and succeeding in this respect.
But, it may also be a plausible decision to purchase a business that has been out of competition for the expected ROI alone. In this case, also, you have to associate with the immaterial goals of the company and have measurable and valid data on the business.
Find Out Businesses For Sell
Now is your time to look for businesses that are on sale. Once you have determined the industry you want to enter, you need to look for businesses that fit your criteria. You will find businesses to buy through different mediums, as explained below –
- You can look for online marketplaces like bizbuysell.com. They have more than 45000 active listings.
- Go through classified newspapers and look under the “Business for Sale” section.
- Craigslist ads.
- Ask around in the network of small businesses.
- Attend business conferences and meetups.
- Find a business broker and work with them.
Indeed business brokers can help you. But, since they represent the sellers, so you need to keep in mind not to relay all information to them. However, they can help you find the business that fits your criteria, sort out the companies that might fail, and keep the paperwork smooth and clean.
Start Asking Questions
When buying a business, you need to know if the business’s current owner wants to sell it. There can be many reasons behind it, such as –
- The owner wants to retire.
- The business is unable to pay the debt.
- A poor concept behind starting or running the business.
- Problems regarding locations.
- The issue with the brand’s public identity.
- Bad equipment.
- There are fundamental issues with the business.
- The industry is facing a decline.
You should be able to pinpoint why the seller wants to sell the business. Ask the owner about the possible challenges you might face once you take over. Also, you need to ask yourself if you are capable of facing the challenges in that business and making a positive difference.
Buy The Business Aligning With Your Budget, Goals, And Resources
I hope you have created a shortlist for buying a business that wants to sell itself. This is the time to choose the ideal option amid the different options you have narrowed down so far. The best option now would be aligning your goals, budget, and resources with the option you have narrowed down.
Calculating the size, sales, location, staff, and more aspects of the business you want to buy is also an integral part of buying a business. This will give you an idea of how much you want to change the business you have purchased and how much the process will cost you.
You should also consider the time, money, and resource you are willing to spend when buying a business.
Do Your Due Diligence
A critical step before buying a business is the process called due diligence. It means gathering necessary and valuable business information before closing the deal. In this case, you should also work with a lawyer and an accountant to collect all the necessary data.
A good accountant will help you analyze the business’s financials and represent you during the negotiation. However, the business owner will ask you to sign a non-disclosure deal during the diligence process. Once you sign this deal, you cannot share any information that the seller uncovers during the diligence period.
During the diligence period, you must gather some of the following documents if you are considering buying the business.
- Business permits and licenses.
- Organizational paperwork.
- Zoning laws
- Letter of intent
- Environmental regulations
- Contracts and leases
- Business financials
- Organizational chart
- Status of equipment, inventory, furniture, and building
This is where the whole deal concludes. Some buyers and sellers usually place different values, which ends up making the deal fall apart. However, you can use the help of a business evaluation professional who can help save thousands of dollars by creating a great estimate value.
Once you are done evaluating the business, you come to the phase where you finalize your purchase. Before you finalize your purchase, you must read the capital needed to buy a business. Business owners also often buy a business using personal or family money, through seller financing, selling stocks and employees, and by patterning with other buyers.
I hope that you have found the answer you were looking for. However, if you have any more questions you need us to answer, you can let us know through the comment section. Thanks for going through this article.
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