Purchasing an already established business is a great alternative to starting your own. That being said, you have to be careful of the potential pitfalls that come with the territory. After all, acquiring a business is a monumental decision that will influence your life and work for years to come!
Start With a Plan
Begin the process of looking for a business with your priorities in mind. For example, consider the location. Do you want to move to where the action is or find a place close to your current residence? Remember that the location will influence the available workforce, taxes, clientele, and other important factors. The size of the business is another element to take into consideration. A small family business would be easier to manage, but a large business could lead to bigger profits. What are your priorities? Create a list of what you want in a business before you even begin to look for one. This will help keep you on track and not get distracted by the many options.
Do Your Homework
Researching available businesses is the next step. Start small by talking with friends and family. Is anyone they know looking to sell a business? Then extend the search to your business contacts. If you can’t find anything, then move on to the internet. Be careful when searching for a business online. Although there are legitimate business opportunities available, there are also countless scams or bad deals.
When you find a potential opportunity, find as much information as you can about the business. You can do this by reading reviews online and checking to see if it’s been mentioned in any press, both good and bad.
Don’t Forget Due Diligence
Although it may be tempting, don’t jump right in as soon as you find a business you want to buy. Create an acquisitions team including an attorney, a financial advisor, and an independent business valuations firm. They’ll be able to help you evaluate whether or not the business is a sound investment opportunity. You should also have a professional accountant review written financials and clarify anything that’s unclear. By purchasing the business, you’re accepting liability for things that happened even before you came onboard.
There’s no doubt about it, purchasing an existing business is an expensive venture. Unless you already have another party backing you financially, you’ll need to find funding. Once you’ve decided on the price, you have a few different options such as seller financing, angel investors, venture capital, or a business loan. Each funding source has its advantages or disadvantages, so make sure you do your research and seek the counsel of other professionals before making the leap.
After you’ve done your research, found the perfect business, and come up with the funding, you’re ready to draw up a sales agreement and make it official! Buying a business is a great opportunity, but keep in mind that it requires significant effort. Following these steps will help set you and your new business up for future success.
Are you looking for some financial guidance when it comes to purchasing an established business? Precision Financial Services would love to help you navigate this huge endeavor and help to counsel you on best practices in order to set you up for success!