Buying a business is a big life decision and should not be made lightly or without a great deal of deliberation. There are many intricacies at every part of the process and in order to come out on top, nothing should be overlooked. In part one of this two-part series we will outline two very basic things you need to do before you even consider buying an existing business.
Figure out what you are looking for:
First and foremost, is this the right time? Just like most big life decisions time can be everything. It is important to make sure that both personally and financially you are ready to take on such an endeavor. Acquiring a business can not only be personally time-consuming but financially strenuous. With that in mind, it is important to have a firm understanding of your personal financial cash flow and to what degree the acquisition of a business would affect this.
How involved do you want to be in this business? Are you looking for something that is relatively turn-key? Or are you looking for a more hands-on experience? Keep in mind that the preverbal buck stops with you when you are looking for a hands-on type business. Are you willing to come in before the sun rises and leave well after the sun goes down?
What type of business are you looking for? The size, location and type of industry the business is in, all play a factor when attempting to answer this question. To elaborate, do you want to own a small family business or a large fast-pace corporation? Furthermore, are you willing to move or would you prefer something closer to home? Keep in mind, it is important to have a firm understanding of the geographical opportunities and obstacles. Things like, labor costs, taxes and regional legislation can all greatly impact your bottom line. Lastly, be sure to find a business that suits your experiences. If you acquire a small diner and know nothing about the restaurant industry it could prove difficult to make sound business decisions.
Do your due diligence:
There are several things to consider when buying a business for the first time. As mentioned above, if you are going to own a business, it’s important to understand what your role is in this machine. Also, what are the roles of the current employees? Will you be required to hire new employees, or will you be able to retain the current ones? And most importantly what are the roles and responsibilities of the person you are buying the business from? All-to-often individuals purchase existing business that are thriving. Only to find out that the previous owner was the key driver of this success. Therefore, you need to be certain that you can readily absorb the roles and responsibilities of the current owner or have a person in place that has the capability to do so.
When it comes to acquiring an existing business there are a great number of details and considerations that go into the actual analysis, valuation and purchase of said business. Therefore, finding a Business Consultant or Broker can be a highly beneficial addition to your team at this point. As they can assist with not only negotiating a deal for you but also ensuring you are investing in the right business that fits your needs, at the right price.