Making the decision to go out on your own and buy a business is a huge decision. What other things should you think about when deciding what type of business should you buy? Here is a list of items to consider:
- how much equity do you have?
- how much debt can you afford to carry?
- how much debt will a bank lend you?
- what is your expectation of the salary that you are to receive. if you are investing $100,000 and hope to get a salary of $100,000 per annum, stop looking for a business because that is not realistic but many people believe that they can do this.
- how many hours are you willing to work each week?
- how far is the business from your home, how much time will be spent commuting?
- do you have kids? do you need to go home during the day, is that possible with the new business?
- do you want a fixer upper or do you want a business which is well established, needs little improvement? The former will be cheaper, the later will be a more expensive business to buy.
- when you find the business, do they have proper accounting records?
- are their external financial statements prepared by an accredited accountant?
- what type of opinion did the accountant provide, notice to reader, review engagement or audit?
- ask for internal financial statements for the current and previous year and compare the two so that you can see the trend in revenue and profits on a month to month basis
- how many employees do you want?
- are you a people person?
- do you have all the skills to operate the business or do you need help?
- do you need a partner to help with the business?
- do you have the support of your spouse and your family?
- do you have a plan of how much you are willing to pay for a business? you need to determine how you will determine the price you are willing to pay. Buying a business is based on sound economics and not on emotions. If you buy on emotions, you may over pay for the business.
- do you have your support team, lawyer, accountant, banker selected before you start your search?
These are just a few items to consider when buying a business.