Rules When Buying A Business

Ten Rules When Buying a Business

by Calia Roberts,  

With the proper research, buying an existing business can be profitable.

Purchasing an existing business is often more attractive to entrepreneurs than building a business from nothing, as taking over an existing business can be much easier than growing a business from the ground up. While buying an existing business can be a bargain, there are some rules to follow to ensure you are not investing in more problems than profit.

Determine Expectations

Determine what your expectations are from the business, then analyze if the business is able to fit your expectations. This first step will avoid many headaches that come with owning the wrong business for your needs in the future.

Reasons for Selling the Business

Find out why the owner is selling the business. Reasons such as retirement are common and understandable, but reasons such as the business is too difficult to run or has a low return on investment typically indicate future problems.

Making the Transition

Arrange to have the owner stay on for a short time after the sale to make the transition between owners easier. This is especially important for sales-driven businesses, as the previous owner can familiarize the customers with the transition, which is beneficial to avoid losing sales.

Find Out the Problems

Research the business thoroughly to find out the problems of the business. While all businesses have problems, some are bigger and more costly than others. Determining the problems will help you determine the viability of the sale. Avoid purchasing businesses that owners claim are problem-free, as this is a definite indicator of future issues.

Determine Growth Potential

The goal of purchasing a business is to make that business a success and see a return on your investment. Determine the growth potential of the business by analyzing all relevant information, including its track record, to determine if the business has potential for success going forward.

Examine Documents

Become informed about the business by requesting to examine all pertinent documents, such as financial statements, partnership agreements, contracts, leases and tax returns. This information allows you to determine the obligations and the current success of the business.

Negotiate

When purchasing a business, it is essential to negotiate during every aspect of the purchasing process. Successful negotiating gives you the best start and the best options in the future. Enter the purchasing process with the mindset that everything is open to negotiation.

Evaluate the Location

Potential owners interested in a brick-and-mortar business must evaluate the location prior to purchasing. The location of a business is crucial to the success of the business, especially when relying on foot traffic for sales. Research the location and the surrounding area to become informed.

Employees

Before purchasing, determine if the best business move is to keep the existing employees or to hire your own employees after completing the purchase. If you intend to keep the existing employees, you become liable as an employer for all relevant obligations, such as vacation pay, insurance premiums and salary.

Have an Exit Strategy

Always have an exit strategy in place for when you are ready to move on to other ventures. Before purchasing, determine if the business will be difficult to sell. If the business has been on the market for a while, you might be purchasing the proverbial millstone around your neck.

For a complimentary consultation:
Contact  Cecil Williams (cecil@bizbrokerflorida.com) or call  at 888-925-5055 ext.206.  Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com  Also, visit our Florida Business Exchange website at www.fbxbrokers.com