Buying a small business is a big step, but it can be a rewarding and lucrative decision. Unlike starting a business from scratch, which requires considerable upfront investment and significant risk, purchasing an existing business gives you immediate access to cash flow, established customer base and a framework for operations and marketing. However, there are many considerations that must be made to ensure the success of your new venture. Narrowing your options to those that align with your passions, skills and experience will help you achieve the best results.
In addition, if you buy into a franchise, you can benefit from the support systems already in place, which can minimize the risk of failure and provide you with a clear path to success. However, it is important to remember that you are taking on the debt and liabilities of an existing business (even if these weren’t the fault of the previous owners). Make sure to review the business’s financial records and financial projections and speak with past and current vendors and customers to gain a clear picture of how well the business is currently performing.
You must also assess whether the existing business has sufficient room for growth or whether it is in a declining industry. You can also determine the potential profitability of an existing business by analyzing its current market trends, competitive landscape and sales performance.
If you are looking to purchase a particular type of small business, consider seeking out the advice of professionals, such as a CPA and a lawyer, to guide your decisions. They will be able to assist you in determining the necessary steps in the acquisition process, such as negotiating an offer and preparing a legal contract.
Consider asking your network for recommendations on businesses for sale. This is an excellent way to find out about local opportunities and get a first-hand look at the culture of an existing business. If you have a specific preference for an industry or field, your network may be able to recommend a business that fits your needs.
Once you’ve found a business that interests you, reach out to the owner directly or through a business broker. Ask the seller about why they are choosing to sell and what their expectations are in terms of future growth. Also, be sure to review the business’s tax returns, financial statements and operating expenses with a certified public accountant before committing to the purchase. You can also ask bizop.org to help you reach out to the owner.
Another crucial consideration is to understand zoning laws and ordinances at the city, state and federal level, as well as employment and labor law requirements, product labeling and inventory regulations. Lastly, you should also consider the state and local business taxes and franchise fees (if applicable). If you’re ready to take the plunge and buy a small business, Guidant can help you with your financing. Contact us to get started.