Buying an already trading business is a fast way to become an entrepreneur. There are many advantages to buying a business over launching a new venture. For example, much of the hard work has already been done for you, cash flow is much more immediate, and you will have a much clearer idea of what profits can be made. However, buying a business is not without its risks. You will still need to work hard to ensure that the handover is seamless and causes minimal interruption to customers and the existing staff members. The solution is to take a more organized approach. Follow this step by step guide, and your new business purchase is far more likely to be a success.
Step One: Get Advice
You are going to need to negotiate, get a valuation, and go through the sales process when buying a business. Work closely with an accountant and your lawyer so that you avoid the risk of hidden surprises. If possible, ask to audit business operations and other logistics that may help determine business health. You might also consider using the services of a business broker.
Step Two: Research
If you’re in the market to buy a new business, always do your research. Look at the sector that you’re interested in, and narrow down your options. Shortlist the businesses that look the most promising and that have scope for growth.
Step Three: Viewings
You will want to get a close-up perspective of the business that you are considering buying. Talk to the owner, and arrange a good time to visit. Make a few visits at different times of day, but be subtle. Don’t stress out the staff, who might be unaware of what’s happening.
Step Four: Organize Your Finances
You’re going to need money to buy a business, but you don’t have to rely on your savings. Lenders are particularly interested in funding the purchases of new businesses, and online providers of funding will have dedicated small business acquisition loans with good repayment terms. All lenders will want information, though, so make sure that you have access to:
- The financial history of the business that you want to buy
- The business’s financial projections
- Paperwork confirming your own financial situation
Funding the purchase of an existing business is far easier than getting a loan for launching a brand-new business venture
Step Five: Make Your Offer
This will be a crucial moment for your business purchase. Use the advice of your accountant and your lawyer to make sure that you have settled on the right price, and don’t be afraid to negotiate. Don’t just negotiate on the price either. You could include perks to the deal, such as allowing for an overlap in ownership to smooth over the transition period.
Step Six: Complete the Sale
There are many reasons that a deal might collapse at the last minute. Even if the process has been simple so far, don’t assume that it will remain so. There will be conditions to the sale, such as the transfer of leases or the change in tax registration. Make sure that your paperwork is in order, and you will be far more likely to close the sale without added complications and stress.
It is usually more expensive to buy an already trading business rather than launch one from scratch. However, with an existing customer base and an in-place stream of revenue, the advantages can often far outweigh the risks. Take your time when buying a business, and your new acquisition could be the key to a more lucrative and financially stable future.