Buying a Business? 5 Things You Should Know
If you are looking to buy an established business, you’ll need to tick numerous boxes before the sale is finalized. Let’s go over the most important ones and ensure you buy a business you can help grow.
Understand the Kind of Business You Want to Buy
The first step you need to take is to explore what type of business you want to buy, of what size, and why.
Are you looking to buy a business you can run for the next decade? Do you want to sell it yourself in the next three years? Do you want to take an active managerial role or let someone else handle the day-to-day?
When buying a business, it helps to invest in an industry you’re already very familiar with. It will make both the acquisition and the management much easier.
Determine the Value of the Business
Once you’ve found a business that suits your needs and plans, you will need to determine how much it is worth. You need to understand not only how much you’re supposed to pay for it but also how much money it is likely to generate over the next year and how much it will cost to run.
If you are an expert in all financial matters, you can value the business yourself. All you will need is access to all relevant documents from the current business owner. However, it’s usually a better idea to let a professional assess the value of a business, as they can provide an unbiased report.
Write a Mockup Business Plan
Once you know how much the business you’re interested in buying is worth and you’re ready to pay that amount, take a moment to write a business plan for it.
Consider this a practice step. Can you come up with a realistic plan? Do you know what you will need to change to grow the business? Do you need to lay people off or hire someone new? Do you need to restructure it, relocate it, or perhaps switch to remote work?
Understanding what you want to do and, more importantly, how realistic your plan is will help you determine whether the business is the right choice. If you feel completely at sea and have no idea what the next step should be, take more time to think it through.
Find the Funds
Unless you already have a lot of money set aside for the purpose of purchasing a business (or making an investment), you will need to secure funding.
You can take out a loan, provided that you have all the resources to back it up. Some banks will demand proof of your entrepreneurial skills, while others will have quite high interest rates. Make sure to explore multiple offers and options before you choose to take out a loan.
You can also look for a small business investor, someone who specializes in putting up the money needed to get a venture off the ground or help it grow. These investors will sometimes want a seat at the table, so consider whether this is something you’re willing to provide. Others will simply provide the money, be there to offer advice, and let you run things as you see fit.
Take Care of the Legalities
Before you can close the deal, there will be numerous legal papers to draft and sign:
● You will need a bill of sale, which transfers ownership from the old owner to you.
● You will need to sign a new lease with the owner of the business premises. This is a good time to renegotiate the terms of the lease, too.
● You will need to transfer ownership of all vehicles, patents, trademarks, and copyrights to yourself as well. This will require a fair amount of paperwork.
● Ask the current owner to sign a non-compete so that they can’t use their knowledge and experience to set up a new company that is directly in competition with yours.
● Renegotiate all contracts with vendors, suppliers, and employees if you need to as well.
It’s a good idea to hire a good lawyer and accountant for this stage to make sure everything is handled properly.
Wrapping Up
Now that you understand the basics of buying a business, you can start looking at marketplaces. Remember to go over every piece of information at least twice and to take as much time as you need to make your decision.
This guest post was authored by Sarah Kaminski
Sarah Kaminski is a life enjoyer, positivity seeker, and a curiosity enthusiast. She is passionate about an eco-friendly lifestyle and adores her cats. She is an avid reader who loves to travel when time allows.
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