Buying an existing business is popular because it lets you skip some of the pain points of starting a new business from scratch. It also allows you to jump into an industry that you’re familiar with or have a passion for.
But there’s a lot that you have to consider before you buy a business. This guide to buying a small business will walk you through the process.
1. Know Your Goals
Before you can start looking for businesses for sale, it’s important to figure out what kind of business you want to buy. Not only should it align with your passions, interests and skills, but you also need to consider the direct day-to-day impact that the business will have on your life. For example, some types of businesses require you to be hands-on on a daily basis, while others are more suited to a higher-level management style.
Then, you can focus on finding a business that meets those requirements. You can do so by researching businesses online or through business brokers who specialize in connecting small businesses with buyers. Additionally, you can keep up with industry news by attending conferences and other events. This will ensure that you are always in the know and can find a business for sale when the time is right.
2. Do Your Research
If you are considering buying a business, it’s important to do your research. This process will help you determine whether or not an existing company is a good fit for you. It will also enable you to understand the financial requirements of different businesses. You can find businesses for sale online, through sites like BizBuySell and BizQuest. In addition, you can also work with a business broker who will connect you with businesses that are for sale.
Once you’ve done your research, narrow down your options by focusing on the types of businesses that align with your passions, interests, skills and experience. This will make it easier to identify the right type of business for you. It’ll also help you determine how much capital you’ll need to buy a business.
3. Hire a Lawyer
When buying a small business, it’s a good idea to have a lawyer on retainer. They can help you use the right valuation metrics to determine the value of a business, and also support you throughout the process.
Besides reviewing tax returns and financial statements, it’s also important to see if the business abides by local zoning laws, has any pending legal action against it, and whether or not the seller is complying with bulk sale laws. You’ll also want to review any outstanding agreements with customers or vendors.
Find businesses for sale by searching online business listings such as BizBuySell and BizQuest, or using sites like Craigslist. You can also hire a business broker to get the inside track on industries and company values.
4. Negotiate the Deal
Once you’ve found a business you want to buy and have completed your initial due diligence, it’s time to start negotiating. Work up an offer that’s fair to both the seller and you. Try to leave some wiggle room, as you’ll likely need enough cash to purchase the business and keep it running until you can turn a profit.
Also, make sure you understand why the business is for sale in the first place. This can help you decide if the business is a good fit for you and your goals. Once both parties agree on the key terms, they’ll typically sign a term sheet to initiate the drafting of the sales agreement. This is an important step in the process of buying a small business. Learn more on how to negotiate through bizop.
5. Close the Deal
Buying a business is a popular way for entrepreneurs to become owners without having to deal with the startup costs and pain points of building a new company. However, the process from finding a business to closing the deal can be complicated.
Before you buy a business, it’s important to do your research. Look for businesses online, on sites like BizBuySell and BizQuest, or reach out to your network. Your network might be able to point you in the direction of a local business for sale that aligns with your goals and passions.
Also, make sure the business you buy comes with all of its legal paperwork, and that it complies with any zoning laws. The last thing you want is a surprise lawsuit that could be costly to your finances.