Starting your own business from scratch can be a daunting task. Not only do you have to find and build your own customer base, but you also have to tackle marketing, hiring and establishing a good cash flow, all without any prior reputation. More entrepreneurs are throwing out the business-from-scratch idea and instead are purchasing existing companies. It’s a great way to gain experience in running a company without having to reinvent the wheel. Purchasing a business is also a bit more expensive than starting up your own, but it could save you in the long run, since the business already has a proven track record.
To make sure your business venture is a good deal, you’ll want to do a lot of research. Nothing is a sure thing, even a business that seems profitable. If you aren’t careful, you could be stuck with a company full of angry employees, outdated inventory and poor distribution. Use this guide to ensure you’re making all the right choices when it comes to purchasing a new business.
Choosing a Business to Buy
You can buy any type of business, but you will probably be more successful if you choose one in a field that interests you or one in which you are familiar with the concepts. Take some time to think about what your interests are and what type of industry closely matches your experience and skill set. You will also want to take the following into consideration:
- What Size of Business Do You Want to Purchase? Ask yourself if there are a certain number of employees or locations you feel comfortable with, and also consider the dollar amount of sales. For many first time business owners, it’s best to start small and work your way up towards the large companies with extensive sales records.
- Is There a Geographical Area That Interests You? Consider the costs of doing business in different areas of town. The labor pool may change, as well as the wages and taxes.
- How Do You Want to Search? Once you have chosen an industry and a geographical area, you can start searching. Check your local newspaper, online classified sites and any other posting you can think of. You might also want to take out your own advertisement for a “Wanted” section of the paper. Remember, just because a business isn’t listed for sale doesn’t mean the owner won’t sell. If you have a business you are interested in, talk to the owner.
Before you reach an agreement on a business sale, there are several things you should do. Consider doing the following before you sign any papers:
- Talk to the Owner. Speak with the owner as often as possible. The more you talk to him or her, the more likely you are to understand the real reason she or he is selling.
- Talk to Employees. This will give you an idea of the attitudes of employees and the culture of the company.
- Talk to Customers. See how customers view the business, ask what they like and dislike about the services they receive.
- Consult With a Business Broker. Speak with an experienced professional about buying a business. This individual has real advice and real experience, so don’t expect him or her to provide you with a lot of fluff.
- Check the Credit History. You may even consider running a credit check on the current owner. If there are a lot of outstanding debts, you may realize the business is in worse shape than you anticipated. Look into every possible nook and cranny before you reach an agreement with the business owner. Once you’ve decided to move forward, you can consult with a tax or legal advisor to provide assistance for small business transactions.
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.