Buying a business is a great way to leverage an existing brand and customer base in order to turn a healthy profit. But there are loads of things to consider when buying a business — from staffing and franchising to mindset and profitability. It is probably never going to be 100% stress-free, but you can definitely take some practical measures to ensure that the process runs as smoothly as possible. Here are a few ways to make the whole experience of business-buying work for you.
What you need to know about buying a business
Everyone loves the fantasy of building a business from scratch: being there during the early days and creating an empire from nothing. But being there from the beginning is not a guarantee for business success. Sometimes, buying an already established business is the best way thing to do, both financially and emotionally.
Small business owners who sell their businesses have many different reasons for moving on — don’t make any assumptions. A small business is often very personal, and the reasons for the sale may have nothing to do with profitability or brand equity. It’s important that you have open conversations about why they are selling so that you can spot any potential roadblocks on your route to success.
You may have exciting ideas and a clear vision for the business you’re taking on, but tread carefully when sharing your ideas. You don’t know the full story and company history, and sometimes founders can find it hard to let go. If you are keeping them on during the transition phase, make sure that you manage their exit from the company with grace and tact.
There are some advantages and disadvantages to buying a business, so make sure that you walk in with your eyes wide open.
Find the right fit with a checklist
You don’t want to be at the helm of a business in an industry you don’t understand (or like), so spend time carefully considering what you’re getting yourself into. There are thousands and thousands of businesses up for sale, so it’s important that you create a checklist to help you find the opportunities that are going to be right for you.
At least factor in the following when shopping around for potential businesses to buy:
- Company size
- Current staffing
- Brand value
- Company assets
- Growth potential.
When it comes to certain industries, don’t forget to be honest about your intrinsic levels of motivation. A little bit of passion never hurts when starting out, and you don’t want to get into something that’s likely to burn you out within a year.
Know your numbers
At the same time, don’t let your heart rule your head when it comes to making big financial decisions. You need to be 100% clear on the business bottom line — that includes profits, margins, staff turnover, assets, investments, debt, and the rest. This handy business calculator might help you crunch numbers.
Buying an existing business may be less of a financial risk than setting up your own, so this is a good strategy for the cautious investor who doesn’t like to take risks. You can get business loans and finance from banks, but don’t expect anything to be decided there and then. You will need to make a solid business case in order to secure funding.
Leave it to the professionals
We all know that outsourcing is a small business lifeline, so why not get some expert advice during the purchase process too? If there are things that are making you uneasy, or any data that you don’t understand, getting an expert opinion can just help tip the balance either way.
Especially when it comes to dealing with the legal and HR side of things — it’s wise to know when to take a step back and admit that something is not your area of expertise. Even just paying for a few hours of consultancy can help put your mind at rest, and there is plenty of free small business information online you can use for research and validation.
Be clear on franchises
A franchise business might seem like a dream come true, but there are plenty of restrictions that you will need to factor in. Franchise locations don’t tend to come cheap either.
Buying a franchise business is not a good idea for someone who wants to be creative and innovative, as you have to follow strict processes and brand guidelines. But it can be a great investment opportunity for a more methodical taskmaster. It’s worth finding out about any specific exit clauses before you sign up.
Finding businesses to buy
You can find businesses to buy almost everywhere these days — the internet has made the whole process of buying and selling businesses a lot simpler. Social media, websites, forums, business brokers — compare and contrast prices and listings to get a feel for what will work best for you.
Business brokers offer a lot of value, but it’s also great to be able to manage the process of buying a business yourself. Instead of an arbitrator, you can speak directly to the business owner and get an unvarnished account of their business. Especially if you are looking to buy an ecommerce business, you should start by looking at services like Exchange before talking to big-time web brokers.
It’s easy to get carried away with a new business idea, but you need to keep a realistic view of the time and budget you have to devote to a new venture right now. Taking on something when you’re not ready could lead to a world of pain, and it’s not fair to take on a business if you aren’t feeling 100% committed (especially if staff are involved).
Timing is everything — you may need to sit back and let a good opportunity pass you by if the timing is off. Just keep an eye on the marketplace if you are not quite ready to move yet — something suitable is bound to come along!
Buying a business isn’t as easy as 1,2,3, but it’s a lot easier than it used to be! Just be sure never to rush into anything, and keep your mind focused on future business prospects. If you are struggling to see how a business is going to grow, it probably isn’t a good one to be investing in.