Buying an existing business can be a great entryway into being a business owner – but it does come with challenges. Following these steps might make it easier for you to make sure that the business you buy is right for you.
- Understanding if you are ready for business: This doesn’t just involve the financial aspect of things, but also management more generally. Even though there are procedures in place, you still need to develop management skills to oversee those processes. You will need to be disciplined when it comes to day-to-day operations, especially at the start before you become more familiar with everything. Reflect on your current situation and ensure that you can handle the responsibilities that come with owning a business.
- Decide whether you want to buy an independently owned business or a franchise: You will be able to make a lot more decisions and changes if you buy an independent business – but you will also need to come up with a lot more ideas, and conduct marketing and safety strategies by yourself. Franchises on the other hand provide a lot of support when it comes to routine business processes, but there is a lot more rigidity when it comes to handling the business.
- Research the business: Look into all the costs involved in buying the business and potential ongoing expenses that you will incur. Make sure you get an insight into the business’ strengths and weaknesses and how it is likely to perform against competitors.
- Carry out due diligence: Examine a business in detail before you sign a legally binding document. This includes various financial aspects such as income statements, tax returns, etc. You should also review the legal aspect of the business such as intellectual property, registered patents, etc.
- Value the business: Calculate the net worth of your business by taking the assets and liabilities into consideration. Also calculate the value of the business based on future earnings – what you can gain from the business.