Buying a Business: What You Need to Know
Thinking about purchasing an existing business? Here are some things you should know before you take the plunge.
For some people, buying an existing business is a better option than starting one from scratch. Why? Because someone else has done much of the legwork for you, such as establishing a customer base, hiring employees, and negotiating a lease. Still, you'll need to do some thorough research to make sure that what you see is what you'll get.
What Type of Business Should You Buy?
Look for a business that has some connection to types of work you've done in the past, classes you've taken, or perhaps skills you've developed through a hobby. It's almost always a mistake to buy a business you know little about, no matter how good it looks. For one thing, your lack of knowledge about the industry might cause you to overpay. And if you do buy the business, you'll have to struggle up a steep learning curve afterward.
But do try to choose a business that you're excited by. It's easier to succeed in business when you enjoy the work you're doing. To learn more, read Starting and Researching the Right Business.
Finding a Business to Buy
As you begin your hunt for the perfect company, consider starting close to home. For instance, if you're currently employed by a small business you like, find out whether the present owner would consider selling. Or, ask business associates and friends for leads on similar businesses that may be on the market. Many of the best business opportunities surface by word of mouth -- and are snapped up before their owners ever list them for sale.
Other avenues to explore include newspaper ads, trade associations, real estate brokers, and business suppliers. Finally, there are business brokers -- people who earn a commission from business owners who need help finding buyers. It's fine to use a broker to help locate a business opportunity, but it's foolish to rely on a broker -- who doesn't make a commission until a sale is made -- for advice about the quality of a business or the fairness of its selling price.
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