Currently, there are over 28 million small businesses in the U.S, many of which are sold to larger companies.
Buying a business is an excellent investment, especially if you have experience in the industry. But there is a process to follow if you want to make it worth your time and money. Perhaps you’re currently interested in buying a business, but you don’t know how to make the first step.
Sounds like you? Don’t worry, you’ve come to the right place. Here’s how to buy a business.
Decide on Your Ideal Business
The first step of buying a company is figuring out your ideal business. Figure out your passion, skills, and experience as it will determine the industry and whether you can successfully run a business. For instance, if you’re a technology whiz, then buying a computer repair shop would make sense.
And if you need extra help, then you can get more info here.
Browse Potential Businesses
Next, browse the different types of businesses on sale in your area. There are plenty of online business marketplaces, such as bizbuysell.com, but you should also browse Craiglist, newspaper ads, and ask professionals in your network.
Further, attend industry-related conferences and connect with a business broker for guidance. But, as you browse these businesses for sale, it’s important to figure out why they’re being sold. These are major red flags to consider such as a poor business plan, existing debts, and a flooded market.
Value the Business
Before buying a business, it’s important to get it valued. If you get an inaccurate figure, then it could put your investment at risk and prevent you from getting sufficient insurance coverage. At the very least, make sure you ask for the business’s income and assets to get an idea of its value.
Complete Due Diligence
The key to running a business is knowing the business’s data inside-out. Before sealing the deal, make sure you have essential business documents, the previous three years of tax returns, and the organization’s current income statements.
You should also ask about customer lists and existing contracts as it will show you whether it’s still making a hefty profit.
Once you’re happy with the business, secure financing. There are many options, such as applying for a start-up loan, traditional bank loan, or a Rollover for Business Startups (ROBS). Or, if you have the funds yourself, then you can close the transaction immediately.
But it’s wise to hire a lawyer as they will help you negotiate and review the agreement, which can prevent problems later on.
How to Buy a Business
Hopefully, after reading this article, you know how to buy a business.
Make sure you find a relevant business, take time browsing online marketplaces, and value the organization. You should also complete due diligence and secure financing before signing the contract. Good luck!
Found this article helpful? If yes, then check out the rest of our blog for more tips and tricks.
Also read About: how to sell a business