This article are provided for information purposes only, and are not intended as legal advice.


How to buy a business

February 24th, 2010

Many people think about starting a business but are afraid to start because there is a lot of uncertainty, there is no cash flow and the business may not survive or you do not have enough capital to keep the business venture going until you reach break even.  Sometimes, it is easier to buy an existing business where you have immediate customer base, cash flow and existing suppliers.  It is also easier to get financing for an existing business rather than a start up.

 

There are many risks of buying an existing business.  Equipment could be outdated, there could be many competitors, the staff may have poor work ethics, you may have or about to lose a major customer and this may not have been disclosed.

 

You should look for a business to buy which you are familiar with, that will assist you in dealing with size of business, staff, suppliers, cash flow etc.  If you pick a new business with no experience, then you have a large learning curve before you can make positive contribution to the business.  When looking for a business to buy, consider the geographic area, the labour costs, property taxes/occupancy costs etc.  How accessible is the business to customers and suppliers.  Is the business close by your house or do you need to move because it is too far away?

 

Have you researched the industry, the competitors, how much time and effort have you done to investigate what you may get into for the next 20 years?  If you just went see the business without any research, will you be in for a surprise?  How do you know if the technology is changing that could cause the business  not to survive.  Remember digital cameras changed the way photo shops were doing business.  Not everyone goes to photo shop to have their pictures developed anymore. Imagine if you bought a machine to print photos and were not aware that digital photography was changing the business model.  Same thing happened in printing, digital printers changed how printers do things.

 

Do you have a team to assist you in the purchase of the business?  Do you have an accountant to help you review the financial information of the business for sale, do you have a lawyer to help with the legal documents, do you need a banker to help with financing?  Have you used a business broker before?  Will they help you look for your dream business?

 

The more prepared you are to buy a business the smoother the acquisition to buy a business will go.


Filed under: Buy a business — Gary Landa @ 11:28 am


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