Do you like the idea of being an entrepreneur, but don’t want to start with a new idea? If so, your best bet may be to buy an existing business.
Sure, buying a business tends to involve more upfront costs. That said, this is still less risky than starting from scratch. You’d be able to rely on real profit and loss records instead of estimates, and you’d have access to a history of sales.
Not sure how to go about buying a small business? Here are 4 key tips you should consider.
1. Narrow Your Focus
Before investigating your options, it’s important to know what you’re looking for. The two main factors are the size of the business you want to own, as well as its industry. For example, buying an HVAC business makes a lot of sense right now.
Other than that, you should also consider the business location. If you’re open to moving, it will likely be easier to find and buy a business that suits your needs. This will also affect taxes, labor costs, and other fees that will impact your bottom line.
2. Do Your Research
If you wish you owned a specific business, it’s worth putting out some feelers. For instance, do you work for a business whose owners may be willing to sell? Do you know anyone who launched a successful app and is looking to move on?
If this yields no results, move your research to the internet. Start by checking out BizBuySell, the largest online marketplace for buying businesses. Keep in mind that every good deal comes with dozes of bad ones waiting to happen.
3. Do Your Due Diligence
Many entrepreneurs get a bit too excited upon finding a business that seems like a good match. Before diving head-first to buy it, do your homework. Any business that looks great at first glance could hide some big issues underneath.
First, hire an independent firm to perform a business valuation. This will let you know what the business is worth and how the current owner’s expertise affects that value. Then, have a professional accountant go over the business’s financials.
4. Get the Funding
Once you’ve found the right business and settled on the price, it’s time to think about your finances. Oftentimes, your best option is to go for seller financing. This involves the seller letting you make payments over time with interest thrown in.
You can also go for the venture capital option and partner with someone. This makes your partner the financial investor, whereas you’re the on-ground operator. If the business fails, you won’t need to pay debts. If it succeeds, you’ll take a hit in profits.
More on Buying a Business
A founder deciding to sell a business doesn’t have to mean there’s something wrong with it. Founders sell businesses for many reasons, including a lack of passion. When they’re ready to move on, they may want to know the business is in good hands.
Want to know more about buying a business? Need some tips on how to create and stick to a realistic business budget? Check out our “Business Advice” section!
