If you are thinking about buying an existing business, here are 5 important factors when buying a business.
Sometimes it makes more sense to buy an established business than to start one up from scratch. It’s a great way to hit the ground running.
While buying an existing business typically involves more upfront cost, it also presents less risk than starting from scratch. Financially, you’ll be looking at actual profit/loss records rather than rough guesses, and there’s a clear history of sales to guide you.
5 Important Factors When Buying a Business
- Find What You’re Looking For – Purchasing a business is a big decision that will impact your life for many years. You need to start by knowing exactly what kind of business you’re looking for. Location, Industry, and Lifestyle all play a role. Is it local? Will you move? Is it 9-5 or are much longer hours? Is travel involved? If you need to expand your search from locally to national or globally, a business broker has access to listings that you’ll never see otherwise.
- Consider Working with a Business Broker – If you’ve done some research on your own and haven’t yet found the business you’re looking for, consider hiring a business broker to prescreen businesses for you, help you pinpoint your areas of interest, and even negotiate the terms of your eventual business purchase.
- Do Your Due Diligence – When you find a business that’s a good match, resist the urge to dive head-first into purchasing the business. Before you go any further, get your business acquisition team put together. If you’re not working with a business broker, you’ll need an attorney and an independent business valuation firm to help you determine the true value and health of the business.
- Line up the Funding – If everything looks good, unless you’re sitting on a big pile of money from selling your last business, you’ll need to arrange funding. This is usually handled one of two ways. Seller financing or lenders – traditional banks or alternative lending. Each financing source comes with its own pros and cons, so you’ll want to talk to an independent broker/adviser to make sure the funding source you pursue is the best choice for your situation and bottom line.
- Draft and Sign an Agreement – Once you have found a business, done the due diligence, and acquired the funding, have a broker and/or business attorney review the agreement, and you have no questions left unanswered, you can sign on the dotted line.
Choosing to buy a business is a feat to be admired and applauded. This impacts your life, your family, your employees and your community for years, even decades. With a little luck and a lot of hard work, there is a great future ahead.
At Elan Capital, our professional business brokers use the same care in helping to match you to the appropriate business for sale as if we were buying it for ourselves. We can help you buy a business comfortably and efficiently with an experienced professional guiding you through every step.
888.615.1418