If you’re considering becoming an entrepreneur but don’t want the stress of starting your own business from scratch, you could consider buying an existing small business. There are many advantages to doing so, including lower startup costs and access to an established customer base. But you’ll need to do your homework before making a final decision. Here are some things to keep in mind:
Narrow your search to businesses that align with your passions, skills and experience. This will make it easier to succeed in the long run. It’s also important to find a business for sale that fits your financial goals and lifestyle. This means you may need to make some adjustments in the short term, while you grow your revenue and establish profitability.
Research the industry and business’s past performance to determine whether it has potential for growth and success. You can find a wide range of information online, including industry trends, forecasts and competitors. You should also look at the business’s income statement and financial projections to gauge its profitability. And don’t forget to consider any outstanding debts that the business might have (e.g., customer accounts receivable) and how you would collect them.
Find out whether the business is licensed and has all the necessary permits required by law, such as zoning, employment and labor laws, sales tax permits, liquor licenses and state and local regulations. If there are any legal issues, these can be a major roadblock to success for a new owner.
Ask the seller to provide you with copies of all the financial records for the business, including bank statements, income, property, sales and excise taxes. This will help you see the true financial picture and identify any potential problems. You’ll also want to find out the business’s credit history, if there is any, and if it has a business plan in place that will support its success.
When you buy a small business, it’s also worth asking if the business has any assets that might be valuable, such as patents, copyrights or trademarks. These can be especially lucrative in the tech, creative and music industries.
Once you’ve narrowed your choices, talk to a professional business broker about the details of each one. A good broker will help you pin down your interests, pinpoint your strengths and connect you with the right opportunities for you. They can also help you navigate the paperwork and contracts involved in a business purchase, which will save you time and hassle. And they can act as a sounding board and offer advice throughout the process, so you don’t end up committing to something that might be a bad fit for you in the long run. This is an especially important step if you’re working with a smaller business. They might not have the resources to handle large scale searches like a bigger firm. Plus, they might have a better understanding of the local market and how it impacts your opportunities. They can also set up alerts to notify you when a small business for sale that matches your criteria is listed.