Buying a new business can be an exciting venture, however, there are many things to consider when taking over a business, and the journey can turn into a stressful nightmare when the unexpected arises.
Buying an already established business can have many benefits compared with starting a new business from scratch. Buying an existing business generally poses less risk but typically involves more upfront costs than if you were to build a business from the ground up. Essentially, you are paying for the privilege of purchasing an already established business with proven results that has a client database as well as a digital footprint and recognised branding and business name.
Depending on the business’s nature, you may also acquire patents and other valuable intellectual property that may benefit the company well into the future. From a financial standpoint, when considering whether to purchase an established business, you and your accountant will have the opportunity to comb through the actual profit and loss, giving you a clearer direction of the business’s ongoing potential. Whereas when you are starting a new business, you are only considering future potential from rough estimates.
There is a common misconception that there must be an underlying issue with a business for it to be offered for sale. However, there are many reasons why a business is for sale, including; partnership breakdown, divorce, death, illness, retirement, loss of passion, or as simple as a change of life direction. Generally, the business founder wants it to be sold onto someone with passion who will continue to grow the company.
Where To Buy a Business
Knowing where to find quality businesses for sale is one of the first steps on your journey to purchasing an established business. There are many reputable business sale websites, and a simple Google search will help you source the leading ones. There are also more traditional ways of finding a business for sale, including looking in the local paper, seeing signage on storefronts and through word of mouth.
One of the leading ways to source quality businesses is through a business broker. A business broker is similar to a real estate agent. They get a commission for selling businesses. Like a real estate agent, they will answer any of your questions and help guide you through the legal process of acquiring your new business. However, as the business broker has the incentive of commission to sell the business as soon as possible, it’s important to have reservations and take the time you need to make any decisions, including seeking any relevant independent legal advice.
What Are You Looking For?
Stop and ask yourself why you want to buy a new business. Determining the answer to the below questions will help refine your choices and find a business most suited to your financial and lifestyle needs and goals.
- Is your goal for the business to provide financial stability, or is it more of a passion project?
- How many hours are you willing to dedicate to working in the business?
- What is your budget, including ongoing immediate and future costs?
- Will you need to borrow money to fund the business?
- Do you have any prior expertise?
- Will you need a business coach?
- Are you passionate about the industry?
- What is the ideal location of the business?
- What is the ideal business size?
Once you find a business that ticks your boxes, a comprehensive appraisal of the business will help you to evaluate the business further and will help cement its ongoing potential. It’s worth investing in a business valuation from an independent party to determine the business’s worth and any encumbrances against the current owners that may affect the value; for example, if the current business owner sold the business and their loyal customer base followed them to their next venture. It’s important to safeguard yourself against unexpected costs or undiscovered information.
Closing The Deal
Ensure you are happy with the negotiated terms and have the funding secured before closing the deal. You must understand the contract’s full terms and seek advice from a qualified professional before making any legal or financial decisions.
Buying an established business is a valuable learning curve and an experience that will impact your life financially and personally. Having the right tools, support and strategy available will help make the transition a smooth one.
As a new business owner, you will also need to consider the following; updating or creating a business plan, devising a strategy for increasing revenue, and retaining and growing the customer base.
At UpCoach, we specialise in helping new and experienced business owners catapult their business towards success by providing them with the tools, strategy and support to take their business from where it is now to where they want it to be. We care about your business and its success and help you take your business to the next level with our business coaching programs. Get started today.