The Ultimate Guide to Buying a Business
Buying a business is a dream for many people. While some people may have a specific type of business they’re interested in, others may just be dreaming of any kind of entrepreneurship. Either way, buying a business is a huge step that takes a lot of learning and planning.
It’s important to understand the ins and outs of purchasing a for-sale business. As you plan and prepare, make sure you have a good grasp on all of the details, so that you can make the best decision about buying a business. Here’s everything you need to know:
Before You Buy a Business
Before you jump into purchasing any business that you think looks viable, take the time to plan. There are a number of details that may not initially come to mind but could actually make or break a business opportunity. With proper planning and understanding, you can be set to have a smooth business buying transaction.
Things to consider
Don’t just jump in blindly. While a seemingly good deal may just show up, that doesn’t mean it’s the right one for you. Planning requires having goals and an understanding of what you are capable of purchasing. It gives you direction as you set forward on your buying journey and helps you make the right, intentional decisions.
Take inventory of yourself and the things you’re interested in to determine the type of business you’d like to buy. At the same time, figure out your business goals. If you’re looking for a lucrative business venture but the type of business you’re looking for isn’t very profitable, you may want to reconsider the business sector you buy in.
You will also need to figure out how much of an initial investment you’re able to make and if you’re going to be able to cover all of the upfront costs. Once you have a basic understanding of these details, you’ll be ready to start looking.
Funding a Business
Before you make an offer on a business, you need to make sure you have your funding in place. If you’re not going to be able to pay any initial investments, or if you’re unable to obtain the funding you need, then you’ll have to put your business purchasing dreams on hold for a bit.
There are a handful of ways to fund a business purchase. Figure out the type of funding that will work for you and your purchase, and confirm your ability to obtain it.
You can fund your business purchase with your own savings, with a commercial loan, or with investors. Take a closer look at these options to see which would work best for you:
- Savings- If you’ve been saving money for your business, you may have enough to finance the purchase on your own or make a hefty initial investment.
- Commercial loan- Borrowing money from a bank or credit union is one of the most common forms of business funding. With this option, you will be charged interest as you work to repay the loan within a certain length of time.
- Investors- When you fund a business with investors, you are giving them a stake in your business. In exchange, they provide you with cash to fund the business. This could be a good option if you are not against sharing a portion of the business.
Once you choose the type of funding you’ll need for your business, you’ll want to work on getting everything together. You need to have your funding in place before the purchase, so this should be a top priority. Many business deals fall apart at the last minute due to issues with funding.
How to Buy a Business
You’ve prepared, planned and determined what type of business you want to buy. You know where your funding is coming from. Now it’s time to find the exact business that you want to buy.
- Search For Your New Business
There are many sites and platforms to check out when you’re looking for a business for sale. A few places to start include Daltons, Nationwide Business, and Rightbiz. Each of these sites has online platforms where you can either search for specific types of businesses or simply view their listings.
As you get started on your search, check these sites for a basic overview of what’s out there.
- Get in Touch
Daltons, Nationwide Business, and Rightbiz all include details about each business and contact information so that you can learn more and even get the ball rolling if it’s the right one. Once you have found a business that you’re interested in, you’ll want to use that contact information to reach out to the seller and learn more.
After your initial contact, you’ll know more about the business and will be able to tell if it’s something to continue pursuing. You will probably want to obtain certain details from the seller such as annual revenue, net profits, and why the business is being sold.
Oftentimes after contact, people determine it’s not the right place and they keep on looking. However, if you’re still interested, it’s time to take the next steps.
- Put in an Offer
With funding in place and a business you want to buy, it’s time to put your offer in. Make sure you know what you’re willing to spend on the business so you’re prepared to negotiate. Give yourself some leeway by putting in an initial offer that’s less than your max amount.
Send in a written offer and justify it. If your initial offer is accepted, you’re ready to move on. However, there’s a good chance the seller will come back with a counter offer and it will be time to negotiate.
You should also determine if you want to work with a broker to help you with your offer and subsequent negotiations. While not necessary, it may be useful to have an expert on hand to offer advice and guidance.
- Go Under Contract
With an accepted offer, you’re officially under contract for your new business. During the waiting process, you have work to do. You need to make sure that this business is going to be a worthwhile investment. Work with professionals to look over all the details of the business and your contract to confirm.
Check out the projected financial performance, accounts, VAT returns, current insurance information, contracts, assets, vendor information, debts, and more. Make sure you are fully aware of what you’re getting into when you buy this business.
If nothing goes awry during the waiting period, the date chosen for closing will come. Before closing, all contracts will need to be transferred to you and every condition that was set will need to be met. Once that happens and your closing date comes, you’ll officially be a business owner. Congratulations!
Now that you know how to go about buying a business, it’s time to enter the planning phase. Remember not to rush things. Take your time and plan properly, figure out your funding, and start searching for the perfect place. If you’re patient and intentional, you’ll be on your way to owning a business!