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Buying Tutorial

Thinking of owning your own business? Buying a business isn’t just a job change; it is a lifestyle change too. You will always be thinking about it and it will mean a lot more to you. If this seems right, then read on to learn more about the art of buying a business.

Are you looking to obtain the following?

  • Flexibility
  • Income
  • Recognition
  • Security
  • Privacy
  • Status
  • Customer and employee contact

Then buying a small business may be the right choice for you. Don’t worry about having owned a small business before, 90% of small business owners didn’t previously own a business. Remember, too, when looking for a business to remain open minded about your preferences. What business you think you’ll enjoy owning and what you’ll actually enjoy can be very different.

Important Factors to Identify When Buying

How long the business has been around: The longer a business has existed, the more likely it is to have a solid customer base and be well known in the area. This usually means it’s a good business.

Why the present owner is selling: Find out why the current owner is selling. If he or she is old and owned the business for decades then its normal that they want to retire. If the owner is mid 30s or 40s and owned the business for less than ten years then there might be something wrong.

Records and all bookkeeping: You want to see as much information as possible before buying a business. Looking at the financial records is a good indication of how a business is doing and whether to continue pursuing it.

Is the seller reporting all income: There’s no way to know for sure, if a seller tells you they are skimming money, be wary about how much they tell you. If they are skimming then there’s no documentation to back what they say, so rely only on the provable figures supplied.

Scoping Out the Right Business

Visit First: If you’re considering a business, try visiting first as a customer. See how it looks inside and out. See how much information you can obtain from playing this role and ask yourself, “do I want to own this business?”. Some places may require you to schedule an appointment, if possible, do so.

Get the Basics: If you like what you see, learn what the income, terms, price, cash flow and other basic information is. See how much income the business will generate for you. If it doesn’t mean your financial needs then buying this business isn’t going to work for you. Also understand that financing for this kind of purchase is limited; often it is the seller who finances the purchase.

Make an Offer: If everything up to this point seems good and you’re interested in pursuing then see what the owner is willing to sell at. The general rule of thumb is the more you’re willing to invest up front the less you will pay in total for the business at the end.

Questions to Ask Yourself When Considering Buying
  • How long have you been thinking about buying a business and what is your time frame for finding one?
  • Are you willing to invest a majority of your liquid assets in this business?
  • Are you able to make your own decisions and handle being in control?
  • Does your family support the lifestyle change you’ll make by owning a business?
  • Are you open minded and have reasonable expectations about the business you’re searching for?
  • Do you need a guarantee or can you take the leap of faith necessary to buy a business?
Have You Got More Questions?

Please contact us if you need answers to the following questions or if you have any other thoughts which you would like to ask or discuss!

  • Do I need an attorney?
  • Why should I go to a business broker?
  • What happens when I find a business I want to buy?
  • What does it take to be successful?
  • What should I look for?
  • How are businesses priced?
  • What is the real reason people go into business for themselves?
  • Why should I buy a business rather than start one?

 

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