If you’re hoping to become a business owner, your first thought was probably to start your own business. However, buying an existing business could be a much more straightforward and less risky option for budding entrepreneurs.
Buying an existing business can provide you with an existing cash flow and income, as well as a customer base and team of staff. For these reasons, buying a business is a very appealing prospect to those hoping to be their own boss.
So, if you need a helping hand in knowing where to start when buying a business, our latest guide offers you 3 simple steps to follow:
- Finding a business
- Considering the value and price
- Negotiating the best deal
Finding a Business for Sale
The first step is an obvious one; you need to find a business that you are interested in buying! If you are hoping to become a business owner, finding the right business for you can be instrumental to your success.
Consider your skill set and what industry you would be interested in working in. It may be an industry you’ve had previous experience in, or you may be looking to apply your skills to a new area. Whatever you choose, ensuring you have some familiarity with it can be a big help.
Play to your strengths and search for businesses for sale that match your expertise, as this can result in a much smoother transition for the existing business, customers and staff. You must know your market; if you are entering a new industry, do your research.
Considering the Value and Price
When you have decided on the type of business you want to buy and have found the right business for sale, it is important that you carefully consider the financial side of things. Make sure you are confident that the business is financially viable, and that it is worth the asking price.
The price of the business is likely to reflect its profitability in one form or another, so keep this in mind too. Be sure to ask questions to understand the calculations that were done to reach the asking price. This may include viewing financial records and other documents that will back up the seller’s information.
This is crucial in making sure you are paying a fair price, as well as having a transparent overview of the business's current financial condition.
Negotiating the Best Deal
If you’ve been happy with everyone you’ve seen so far, the next step is to negotiate a deal. Make sure the business fits your budget; consider the profitability and the risk factors involved. You mustn’t overstretch yourself.
When coming to a deal, it’s crucial to make sure that you will reap the rewards of your investment further down the line. In other words, you want to make sure you make a profit on the deal in the future. Assume the asking price is negotiable, and do some research into the sale price of other businesses in the industry. This can help you to determine whether the seller is asking for a reasonable amount, or if further negotiations need to take place.
If you need further advice on buying a business, or you’re ready to buy and would like some help, get in touch today!