How to Purchase a Business: Everything You Need to Know
For prospective company owners, learning how to purchase a business can often save both time and money.3 min read
2. Downsides to Buying an Existing Business
3. Why Do Owners Sell Businesses?
4. How to Find Businesses to Buy
For prospective company owners, learning how to purchase a business can often save both time and money. In fact, the time and money you save in not having to build enough inventory are most likely going to be phenomenal. In a sense, it's as if the dirty work is already done. Once you take possession, it means immediate cash flow.
Benefits of Purchasing an Existing Business
An established business will have a record of financial history that you can turn to, which will help you know what to expect as you take over the company. This means you can see what worked and what didn't in the past, and then take action to improve profitability. In addition, you will be gaining experienced staff, contacts, suppliers, equipment, and stock. Name brand recognition will also be acquired when copyrights and trademark logos are involved and transferred to you.
Downsides to Buying an Existing Business
As with any business investment, you also take on risk when deciding to take ownership of an established company. While the idea of an experienced staff sounds great, you did not hire them. That means there could be personality clashes and new rules the existing staff doesn't want to conform to.
The previously mentioned financial records are indispensable, but assessing and evaluating the data can be an intricate and daunting task. For many new business owners, this means hiring a financial advisor to help assess and plan for the financial future of the business. Other expenses to consider are any health and building inspections that may be required with new ownership.
Exciting as it sounds to open and build your own business from scratch, looking at available options for sale and seeking interested business owners are worth considering before taking the huge step of building one from scratch.
Why Do Owners Sell Businesses?
Owners sell their business for a variety of reasons. The decision to sell may have been the plan all along in terms of retirement. Founders often invest a lot of hard work and time in hopes that eventually the work will pay off and they can retire, thus selling their business fulfills the original goal. Other interests and commitments may motivate an owner to sell. Maybe they have enjoyed the experience so much and are bursting with ideas to start another company.
How to Find Businesses to Buy
To find prospective businesses, search through:
- Business broker websites.
- Real estate agencies.
- Commercial websites.
These are all resources to use when searching for a business opportunity. Make a shortlist of potential businesses to suit your budget, interest, and goals.
As you set out to see what options there are, you should know what it is you are looking for. Business ownership is not something to take lightly. It will most likely be your livelihood and will have a huge effect on many areas of your life. Consider the risk in terms of small business, large business, and enterprise. While strong profits and gains look appealing, a big, bustling enterprise will most likely have a large buying price as well.
If you are looking to potentially invest in a particular product, do your research, know what the demand is, and determine if it's a fad or a trend that will not last. Decide if location is important to you or if you are willing to commute or relocate, and how far you are willing to go.
Know what type of hours you want to work and if you want to travel. If you are an avid traveler, then you may want to consider a business that will allow you to do so. As a business owner, these are your decisions, but ownership also may also translate into making some lifestyle changes for the success of the business.
Most importantly, when you have locked in on a particular business you want to buy, do your due diligence. This should be done before signing a binding contract. Due diligence will help you assess the value and risks involved in your purchase. It is an opportunity for you to ask questions and ensure you are getting a business worth investing in.
If you need help with knowing how to purchase a business, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.