When it comes to starting up your own business, most people tend to start from scratch and work their way up. This is arguably the most popular choice. Even if you don’t have much starting capital, it’s very possible to kickstart a business as long as it’s got a good idea. You could even go to your bank and ask for a business loan if they believe you’ve got what it takes to make your business idea a reality.
However, there are other options to help you get into business more quickly yet still give you breathing room to law. A good example of this is to simply just buy a business instead. There are many ways to approach buying a business which is why we’ll be talking about the various considerations that you could keep in mind before you sign any contracts.
Why is the business being sold?
First, try and figure out why the business is being sold. It’s extremely rare and unlikely that someone would just sell a business for no reason. Even if they just wanted money, they could have just left the business as-is since it’d continue generating money. If there’s something wrong with the business then it’s important to ask the seller to disclose what the issue is. You might even want to ask them why they’re selling their business.
There are actually many good reasons why people sell their businesses. For example, they might be retiring soon or they might be having trouble with their business idea. With that said, the location could still be excellent which means it’s almost like buying a commercial property at a discount. You can remake the business if you really wanted to, but we’d suggest against that unless you know what you’re doing.
What drives profits in the business?
Every successful business has some kind of main income. Some businesses might sell products in their retail store, but the majority of their income could come from online sales. When you’re buying a business, it’s essential that you ask about the different sources of income that they might have. This will help you decide what to focus on when you buy the business. It can also help you understand the optimal way to run the business once you’ve taken over it.
When having any kind of discussions with the current owner, try and include questions regarding the different sources of income. You might not be able to replicate everything they do, but it should help you understand where the money currently (or used to) come from so you can judge how much profit it really makes.
Do you plan to make any changes to the business?
So let’s say that you’re happy with the way the business makes money and there’s a legitimate reason why the previous owner wants to sell it. In a case like this, you can generally just move into the business, take over it and then start making passive income. However, if you’re looking to improve the small business then you’ll need to devise a plan or strategy to assist with it.
The problem with trying to make changes is that you might ruin something that the customers currently enjoy. For example, if you’re taking over a restaurant then you might want to stick with current recipes unless you’re planning a complete refresh to suit your vision. If it already gets regular customers then you’ll want to try and stick with their current services to ensure you don’t alienate loyal visitors.
Where can you look to buy a business?
It’s a good idea to look at different websites and services to scout out and view listings for businesses for sale. This will help you get a better idea of where you should be looking to buy a business, and there may be specific services or websites that specialize in buying a particular kind of business.
These services can be expensive to use at times, especially if you’re asking a lot of them. However, if you’re just asking them to search for nearby businesses then you’ll find that they can actually be extremely helpful at showing you the choices available. However, don’t think that this means you can drastically speed up the process. Buying a business takes a long time and you need to be financially and mentally prepared for the journey.
Do you have the funds to buy a business?
Buying a business is going to be expensive. In fact, it could be prohibitively expensive depending on what comes with the business. For instance, are you going to be inheriting all of the debt and tax problems that the business has? Will you need to focus on reopening a business during difficult circumstances such as COVID-19? There are a lot of things to consider when it comes to paying for the business.
In short, make sure that you ask a lot of questions regarding fees and running costs. You might have bought a wonderful business for a seemingly low price, but it might come with a lot of baggage that could end up costing you more money than you’d expect.
Do you have the time and dedication to buy a business?
We briefly mentioned it before but buying a business can take quite a long time. It can be an extremely taxing and daunting process for many people, especially if there’s a lot of money and livelihoods at stake. You could search for how long it takes to buy a business to get a rough idea of how much time you’ll be spending. In many cases, it could take up to an entire year or more to finish negotiation and transfer ownership to you.
Just don’t buy a business thinking that it’ll be up and running the next day. You’re going to need to inspect the business up close and ask questions regarding the way it operates, how much money it makes and so on.