You have decided that you no longer want to work for anyone and now you would like to buy a business. What do you need to do before starting to look for a business to buy?
Checklist of what is needed before you buy a business
- cash, how much cash do you have, do you need to talk to your banker to arrange a line of credit against your house?
- determine if you want to buy a business or start a business
- determine the type of business that you want, a franchise, a new franchise or existing pre-owned franchise, a business, what type of business, retail, manufacturing, wholesale, service, real estate, mining or agriculture based businesses
- a team of advisors, do you have a good accountant who can assist you in analyzing a business, do you have a good lawyer who has worked on business transactions. Many lawyers are jack of all trades, they do real estate house closings but do they have experience in buying a business? It may be more expensive to use an experienced accountant and lawyer but they may advise you of things that a peson with no experience would tell you
- do you have a banker, you may want to talk to several to find out what they are looking for, what do they need to review a business proposal, what types of businesses will they finance, many banks will not finance retail stores. Do you qualify for a loan? If you have a bad credit score, will they lend you money even if you find the right businesss?
- a business broker. Are you going to get help in locating a business, are you going to contact many different business brokers?
- A budget, how large of a business do you want to buy? There is no point looking at a business selling for $1 million when you only have $25,000 in the bank. Don’t laugh, I have many people who have approached me thinking that someone will finance them because they are willing to pay a good interest rate for someone to take a risk on them. Many investors with no money have an unrealistic approach thinking that everyone is lined up to give them a loan. They do not want to risk their own money in the purchase or they do not have any money, they have not been successful in the past but everyone will believe in their idea and will give them money hoping that their luck or inexperience or past failures can be overlooked.
- a reasonable time frame to find a business
- sufficient cashflow to allow you to live on as well as buy a business knowing that they may or may not be excess cash to pay you a salary for a period of time