As an entrepreneur, you may be on the fence between starting your own business and buying an existing one. However, after analyzing both possibilities, you may have concluded that starting a business of your own entails too many risks and may be much more complicated to get off the ground than you initially thought. Still, you feel unsure as to the steps to take to purchase an existing concern. Let’s see what those may be.
Among the many advantages of purchasing an existing business, you may find:
Time savings – Starting your own requires months to build the right inventory.
Operating history can be evaluated – You may have the opportunity to study the product or service being offered, how well it has sold, and what advertising has been most effective. It can save you the time and energy to do all this on your own.
Growth opportunities – You may have a specific reason for purchasing this firm because you consider you can have a different perspective than the current owners and feel that this gives you a particular advantage.
If you are serious about buying an existing business, you need to study it from every angle and think about issues such as:
Employees – The business may have employees that were not hired by you and may have habits that do not match your way of doing business.
Business problems may be downplayed – There is always the possibility that the books you are shown will not reflect the true picture.
Once you have decided to go ahead with the purchase, these are some steps you may wish to take:
Schedule a consultation with a business broker – Interview some to ensure you have the right chemistry and confirm how much they will charge for their advice.
Review the business’ credit history – Finding that the business is in debt or has failed to make some payments may represent a red flag.
Talk to existing customers – They are a trustworthy source of information and can enlighten you on critical issues.
Talk to the owner and the employees – The more you become familiar with the people who run the business, the clearer it will become why they want to sell and what issues they have faced.
Do some research – Become familiar with the industry in which you will be inserting yourself, find out who their competitors are, what problems they encounter, and what differentiates them from the business you want to acquire.
Negotiate a favorable deal – Ask the owner if equipment, supplies, inventory, and even company vehicles will be included in the sale. The more that can be included in the package, the faster you can start operating. Otherwise, some things may have to be purchased separately.
Sign all the documents – A Neumann & Associates recommend that you talk to your business advisor, tax advisor, or lawyer about the paperwork that needs to be signed to make this sale legal. Make sure all creditors, suppliers, and vendors are advised of the change in ownership. By getting a story out in the local paper, you may generate interest among customers and get some free advertising at the same time.