How to Buy a Business: Everything You Need to Know

How to buy a business can be something that is on your mind at the moment. If so, you need to understand the protocols that need to be followed. After all, it is good to know what it takes to make sure you run a successful business.

Buying a Business – The Preparation and Research Phase

[1] Prepare. Once you consider beginning a business, you’ll also want to consider preparing for what lies ahead. Beginning without preparation introduces some drawbacks, including the trouble of building a client base, advertising the new business, procuring representatives and setting up income all without a reputation or notoriety to go on.

Purchasing a current business is less hazardous than beginning without any preparation. When you purchase a business, you assume control over an operation that is, as of now, producing income and benefits.

You have an established client base, notoriety, and workers who know about all parts of the business. You don't need to reinvent the wheel by setting up new methods, frameworks, or arrangements, since a fruitful recipe for maintaining the business has just been set up. Purchasing a business is regularly more expensive than beginning without any preparation, yet it's less demanding to obtain financing to purchase a current business than to begin a brand new one. Financiers and speculators, for the most part, feel greater managing a business that has a demonstrated reputation. Purchasing a business may give you important lawful rights, for example, licenses or copyrights, which can be extremely important.

[2] Look at What Industry is Right for You. Purchasing the ideal business begins with picking the correct type of business for you. The best place to begin is by taking a gander at an industry that you understand and have a background in. Take some real time to contemplate the sorts of organizations you're occupied with and which best match your aptitudes and experience.

[3] Find Your Geographical Area to Operate In. Pinpoint the area in which you want to operate. For example, if you want to purchase a business that operates out of a state five hours away from you, you’ll want to reconsider unless you are ready to pack your bags and move to that area. Begin by looking in the neighborhood daily paper's area under "Business Opportunities" or "Organizations available to be purchased." You can also run your own "Need to Buy" advertisement portraying what you are searching for. Because a business isn't recorded doesn't mean it isn't available to be purchased. Converse with entrepreneurs in the business; a lot of them won't have their organizations available to be purchased but might consider selling if you made them an offer.

[4] Utilize Your Business and Personal Contacts. Put your personal and business contacts to good use. Speak to friends and family to find out if they know of anyone wanting to sell his or her business. Contact the Better Business Bureau, industry affiliations and permitting and credit-detailing organizations to ensure there are no protestations against the business. On the off chance that the business still looks encouraging after your preparatory investigation, your procurement group should begin analyzing the business' potential returns and its asking cost.

Things to Consider When Buying a Business

  • Stock. Will you offer stock to anyone? Will you be the sole shareholder? More importantly, does the current business owner offer stock, and will he or she want to remain a shareholder in the business once you take over?
  • Furniture, hardware, and the building itself. This is important simply because you will need to determine if you will operate in the same storefront as the business. Will you move the storefront (if you choose to have one)? If you keep it at the same location, will the seller of the business include all furniture? What about hardware if you need it? How about the building? If the owner leasing the storefront?
  • Duplicates of all agreements. This includes contracts of all kinds.
  • Government forms. These should be kept handy for a period of five years.
  • Budgets and expense reports. You’ll want to ensure that you are taking over a business that has an organized budget and expense report.
  • Liabilities and debts of the business. This is incredibly important because you may be liable for such debts of the business, particularly if the sales contract states as much.
  • Records receivable and records payable. This is important because, once you take over, you take over everything. This includes debts, obligations, revenue, etc. unless otherwise stated in the sales contract.
  • The businesses design and logo/branding. Will this match with what you are trying to accomplish for your new business?
  • Procedures for promoting the business. How will you promote the business? Is there a social media page for that business already? How about a website page?
  • Advertising costs. How much will it cost to advertise if you take over that business? How much advertising has that business already done? Will you have to start from scratch?
  • Cost checks. This includes how much the operation of that particular business will cost.
  • Industry and market history for the product or services to be offered in that particular business.
  • What that business is actually offering. Are you going to change the product or service that is being offered? Would that make sure for what you are trying to do in the short and long-term?
  • Area and zoning. Look around at the area in which the business is situated. Is it marketable? Is it safe? Is it an area in which you want to operate your business in?
  • Merchant-client ties. Will the client stop purchasing the product or service if you take over? Do the clients have a close connection to the current owner? Suppose the seller of the business creates another similar business and then reaches out to the clients to have them continue working with him or her as opposed to you. You’ll want to make sure these details are specified in the sales contract.
  • Does the business owner have employees? Will you keep those employees? How much will you pay them? How much do they get paid now? Will they want to continue working for you? What types of additional insurance will be required for these employees -- workers' compensation and unemployment benefits?
  • What about safety issues in the workplace? You want to ensure that the current business owner meets all OSHA (Occupational Safety and Health Administration) requirements. The last thing you want to worry about are workplace injuries should you take over the business. If that happens, you can and will be held personally liable since you are the new business owner of the company.
  • Think about what type of protection you want. Is the current business owner insured? Will you take over the insurance policy?

There are several things to consider when buying a business; these are just some of the most important ones. It is important to ensure that you work with a qualified lawyer who can assist in the sales contract once you have found a business to purchase and agreed on the details. The sales contract must be specific and concise leaving no room for interpretation. Only a qualified lawyer can help you with that to prevent any legal proceedings or issues in the future.

If you need assistance with how to buy a business, you can post your legal need on UpCounsel’s marketplace. UpCounsel receives merely the top 5 percent of attorneys to its site. Attorneys on UpCounsel come from law schools all over the nation.