If you think you have all the tools at your disposal to be a business owner but would rather not have to deal with starting a new one – or just don’t have any idea to start with, then the best possible idea is buying an existing one. However, there are many factors to consider, and diving directly into buying a business is not the best idea either.
While buying an existing business that is already growing may cost you that much, it also minimizes the risk of failing compared to starting from scratch. If you don’t want to deal with starting from scratch, then you need to learn how to buy an existing business and take it from there. With our help, we’ll help you have a smooth transition going forward.
Why Do Business Owners Sell Their Businesses?
There are common misconceptions among people why some business owners sell their businesses. There’s even a stigma that if a business owner decides to sell their business, something’s wrong with the business, or the business is failing. However, more like than not, that’s not the case.
In reality, there are a lot of reasons why business owners sell their businesses. Business owners might be in the stages of their lives that their businesses aren’t fitted for them, or they just want to venture to other types of business, or maybe they’ve just grown tired and bored of their business.
There’s a lot to it than just notions of not being marketable enough or that the business is going into bankruptcy. Sometimes, these business owners aren’t passionate about their business, or it just doesn’t excite them. Simply put, there are a lot of factors and reasons why they sell their businesses.
But even if an owner is ready to walk away from its business, the work there is not finished. Letting go of your business is not an easy one, more so buying an existing one. However, if you find the right person to transact with, the transition will be smooth. Sometimes, these types of people can even elevate the existing business to new heights. When owners sell their businesses, and it went well, owners are more likely to move on from it faster than expected.
Factors to Consider When Buying an Existing Business
Learning how to buy an existing business means knowing what the important factors to consider are. Follow these factors moving forward.
Look for the Right Business
Buying an existing business will greatly impact your life and livelihood, so you just not make abrupt decisions whenever you go hunting for an existing business. Before you start looking for options, start by mulling over what type of business you’re looking for.
Location
Are you open to moving out of town? Or just looking for an existing business locally? Either way, always remember that choosing the location means you will still deal with various taxes, costs, and other expenditures associated with the existing business.
Industry
What line of business are you passionate about? If you are the type of person who likes sports, you might love the idea of owning a sports business. On the other hand, the food industry isn’t too shabby either. Whichever you choose, be sure that you are passionate about it as it will not get you burnt out easily.
Lifestyle
Are you interested in constant traveling? Or are you the type of person who just wants to stay in one location? Are you a night owl? Or a morning person? If you are an owner of the business, and you decide to stop, your business stops as well. You should think twice before what lifestyle you will be having if you are entering into a specific business.
Size
This varies from your budget. If you have the budget to buy large businesses, then why not? If you have a small budget, then go for what suits your current credit. However, buying an already established business means dealing with a pretty high upfront cost, but there’s also a chance of gaining bigger profits. On the other hand, buying a small business means lesser stress and money to deal with.
Look For Available Businesses
Wait, wait, wait! It’s not yet the best time to start googling with “businesses for sale.” The first thing to do is look for businesses near you. Nearby businesses mean you don’t have to deal with moving out of town. Do you have close friends or relatives who just recently started their small business? Or are there any particular local businesses that you are passionate about?
There are lots of businesses locally, for sure, but are they willing to sell it? Still, the best way to go about it is to ask them politely whether they are willing to sell their business or not. Once you’ve scoured the internet for local businesses, the next step is moving outwards and scour the internet. Multiple sites are reputable marketplace when it comes to selling businesses. Beware of any scams and bad deals.
Hiring a Business Broker
If you’ve already scoured through the internet but to no avail, hiring a business broker might just be what you are looking for. Business brokers help you in a lot of ways. They can pinpoint businesses that you are interested or passionate about, or they can negotiate the terms if you already found your ideal business.
Business brokers will charge you around 4 to 12 percent of the purchase price. Simply put, you will pay them once you’ve made your purchase. So, while hiring a broker is a great idea, always move forward with utmost caution and never make hasty decisions.
Provide The Necessary Money
While there are multiple benefits when you outright pay the exact amount to the seller, it can be quite an expensive option. If you can’t simply pay the outright funding, then learning how to get a small business loan and other options are still open and viable.
Seller financing is the type of option in which the seller requires you to make payments over time. In this case, they will most likely put some interest in it over the years. However, not all sellers love this idea, so be sure that the seller is open to this idea. The second option is venture capital, and they are usually business investors that are willing to team up with you.
The last option is the business loan, and you can alternatively use a term loan when buying an existing business with the help of a bank or a lender. What’s good about this third option is lenders are usually open to this type of loan, especially if they have the revenue history of a specific business.
Still, for you to qualify for a loan, your financial and credit records play an important role.
Note: Each option has its advantages and disadvantages. So be sure to do your comprehensive research regarding which type of option is best suited for you.
Finalizing The Deal
Once you’ve chosen the business, agreed to terms and conditions, and already secured the required funding or financing, the next and final step is finalizing the deal with your signature on the documents. When you sign these documents, ensure that you have a reputable lawyer and reliable people around you. Never leave any stone unturned, as it may give you headaches in the process.
Learning how to buy an existing business is a big decision you make. Make the most out of it.
Conclusion
Learning how to buy an existing business is a tough choice to make. There are a lot of things to consider and must be taken with due diligence. Whenever you plan to buy one, ensure that you have the right people around you whenever you decide, from your family, wife or husband, and even kids.
With that said, everything you need to learn on how to buy an existing business is already provided. Be sure not to make any decision hastily and always make time for this life-changing commitment.