Want to buy a business? That in of itself is a big step. Acquiring a business requires more than just financing it: you have to make sure it’s the business you want and can actually run. While that sounds like a simple task, it’s deceptively complex. Below are the five steps that need to be taken to find the right business for you, to accurately judge it, and to make the purchase.
The Type of Business
Owning a business is a lot of work, so it’s important that you play to your strengths. Your experiences and skills in your life should shape what businesses you should look at getting into. Your personality comes into play as well: are you prepared for the breakneck pace of a restaurant, or the logistics-heavy planning of a manufacturing business? Are you looking for a business with or without employees, from home, online, or in an established location? Deciding the kind of business allows you to narrow the field and start looking for established companies in that industry that are willing to sell.
Locating the Business
Now that you have narrowed down the type of business you are looking for you have just got to find the right one. For an established business, are you willing to move or commute the distance to the location? Once you’ve decided on your range, it’s time to hit the listings from one of three major sources:
- Business Brokers: Businesses on these brokerages have three things going for them. You can browse their listings before having to contact them, the business brokers can provide in-depth details as part of a valuation, and businesses listed here have paid for the brokers’ services, meaning they’re serious about selling.
- Franchise Sites: Franchises have a lot of data backing them up, with a solid brand and logistics worked out. Many franchisees provide financing, and there are websites out there for the sole purpose of listing franchises. It’s fairly easy to find a franchise that focuses on your strengths and location.
- Newspaper and Online Listings: Local businesses often list themselves in print or online through services such as Craigslist. This can be done alongside or via third parties such as brokerages, or done directly by the owner. It’s important to verify the business, to make sure it is the right business for you.
Verifying the Business
Once you’ve selected a likely candidate, it’s time to do some fact checking. Read information on the listing and start building a picture of the company. Visit their website, check their Better Business Bureau listing, and view their online ratings through Google or Yelp. Contact those who listed the property if needed and get the address so you can visit the location. If everything has checked out so far, it’s time to approach the seller as a potential buyer and take a look at their business. Ask them for a valuation of their business by a broker, and look over the paperwork yourself. Find out why the business is for sale.
Evaluating the Business
If the business seems legitimate and sustainable, it’s time to get a feel for if it’s the right business for you. Can you handle the workload? Is the buyer willing to provide training or financing? Will the staff be staying on and are they able to work with you? Will a change in ownership cause cash flow problems or interrupt supply? If the business is in a rented location, will the lease have to be renegotiated? Are any intangible assets listed (such as reputation) actually going to be able to be transferred to you? If everything checks out, it’s time to buy.
Acquiring the Busines
There’s more than the money needed to acquiring a business. Do you have the connections to keep the business running? You need the seller to provide contact information to vendors and clients, and ideally to make introductions between you. Do you have all the financial information needed to forecast your profits over the next months? It’s important to have not just enough cash to buy the business, but also enough working capital to make it over the next few months in case there are problems.
Owning a business can be satisfying, but you need to buy (and sell) wisely. Business brokers provide an experienced base to find businesses and properly value them. If you’re interested in any of our extensive services, please contact George & Co. Business Brokers for more information.