Over the last few years, more and more people are seeking to become their own boss. Not all of us fancy the idea of building a business from scratch. In fact, for many, the option to buy an existing business is an attractive one. If you’re looking to buy an existing business and need a place to start, these five tips will help you along your way.
1. Establish the Details
If you’re looking to buy a business, the first thing that you need to do is to establish the details. Determine precisely what you are looking for so that you end up getting exactly what you want. In terms of the location, you might be narrowing down your list if you only want something close to home. Decide if you would be willing to buy something further away that involves a little travel. The location of a business affects it finances, so it’s important to do your research. Decide if you want to buy a large business or a smaller one? For many, large businesses appear attractive as they may draw bigger profits. Having said this, it’s also a lot to take on.
The industry that you chose is one of the most critical factors. Choosing the industry that you have the most experience in is a wise choice! When you’re doing your research, keep it industry-specific. Any dentists looking to purchase their own business, for example, should look at a checklist for buying a dental practice.
2. What’s the Potential for Growth?
With each business that you are considering, you’ll need to assess and research its potential for growth. When you’re running a company, you won’t want to feel you’re your efforts will eventually come to a dead end. Potential for often growth depends on the market of the industry, so you’ll need to do a good amount of market research to make this judgement.
3. Check for Prepaid Expenses
Generally, any prepaid expenses won’t be included in the purchase price, so you’ll want to find out how many of these that there are. If you don’t get enough info about prepaid expenses, this could throw off your whole budget. Of course, sellers will be upfront, but some things may get forgotten about, so it’s good to be thorough.
4. Conduct Due Diligence
When it comes to buying a business, you’ll want to choose the best lawyer to complete your due diligence process. A due diligence process investigates the legal aspects of everything about a company. Areas to be investigated range from finance to employees, contracts and real estate. Until you have all of this information, it’s important not to enter into any contract. Failing to get a proper due diligence process could mean that you end up buying something that isn’t a good fit. You should negotiate a letter of intent which outlines a potential agreement between you and the seller; however, this is not a contract as this should only be a final stage.
Building your own business is a tough process, which is why many choose to buy an existing one. Once you own the business, you’ll have every opportunity to put your stamp on it and truly make it your own.