Looking for a business for sale? A lot of people like the idea of having their own business, but few actually have the patience to start one from scratch. If this is your situation, you can always purchase an existing business, this can be a wise idea because the previous owner will likely have already got the ball rolling.
Pros and Cons of Getting a Business for Sale
Why is buying a business better than starting one from scratch? Following are some of the benefits of this approach:
* Existing client base – you already have a number of regular customers inherited from the previous owner.
* Established operations – the business already has an existing operational plan, subject to changes you may wish to make
* Existing employees – although this is not always the case, buying a business gives you the chance to retain employees who already have a good idea how the operation runs, meaning there is no need for expensive further training.
* Financial statements – an existing business typically comes with assets, liabilities, and a full collection of financial statements to help you get started.
Of course, buying an existing business also comes with some negatives. The most obvious one is inheriting all the possible debts of the business. Jumping in the middle of the fray can also be tough for new business owners, requiring you to obtain an understanding of the business quickly and from the ground up.
Tips When Buying a Business
So how exactly should you purchase an existing business? Keep in mind that businesses are an investment. Choose one wisely and it will provide you with additional income – pick a bad one and you will find your hard-earned money being wasted. Following are some tips on how to start your venture correctly.
Love the Niche
Pick a niche you understand or one you are interested in. Do you like shoes? Are you interested in the restaurant business? Do you love plants? It is important that you are interested with the subject of your business. This means that you: (1) already have a working knowledge on the nature of your product/service and that (2) you are invested into learning more about the venture.
Of course, do not forget to make sure that this business is properly registered in all the right government agencies! Ask for papers and find out exactly when it started and when it needs to be renewed, as dictated by the law of your location.
Check their Accounts
Another important factor to consider is the accounts of the business. Have an accountant go over the income statement and balance sheet – these documents will tell you:
- how much money the business is taking in
- how much assets the business currently has
- how much liabilities they have and
- what are the possible problem spots you will have to address as the new owner. The financial statements will tell you practically everything you need to know regarding the money-debt situation of the business. Note that the accounts must cover the last five years of the business.
This one is very important because any problems with the tax may be referred through to you even though you just purchased the business from the old owner. Ask for tax returns from the last five years to ascertain that they are accurate and up to date.
Ask – Why Is the Owner Selling?
Do not forget to ask the million dollar question – why are you selling? The fact is that most people are reluctant to sell a profitable business. Therefore, you must question – what seems to be the problem in this existing one? Reasons may vary from similarities of the below:
- relocation of the owner
- the lack of customers
- problems with the staff, etc.
Carefully consider if the problem is something you can deal with before pushing through with the purchase.
How much will the business cost and how would the owner like to be paid? Make sure that all the proper documents are present to verify that the person selling the business is within his capacity to make the sale. Typically, buying businesses involves obtaining a loan from the bank. Try to ascertain exactly how you will be able to make payment and the method in which such payments are delivered.
Lastly, inquire about the marketing strategy of the owner. Where do their clients usually come from? How do they promote their products/services? This information is something you will have to build on as you take over.
Considering the benefits of owning your very own company? Any business across any industry could be yours to purchase, just ensure you have looked at both the advantages and disadvantages of owning your own business.