Many people dream of owning their own business, which can bring a great deal of financial and career freedom if it is done successfully. However, purchasing a business can also be risky and stressful if it is not done well. Thankfully, we have compiled some of the best tips for success when purchasing a business.
Tip 1: Decide What to Buy
When purchasing a business, you will first need to find an available company to procure. When you are thinking about this, make some notes on why you want to become a business owner, what type of company you are interested in, the skill set you currently have, and the financial values and goals that make up your future vision. Think about how you will nurture and grow your business and the type of team you want to take with you. How will you keep profits steady and increase them? Gather the names and resources of your financial planners, legal team, and brokers who can help you.
Tip 2: Do Your Research
Success when purchasing a business requires due diligence. Why is this company for sale? Did they go bankrupt or are the current owners simply ready to move on? Who was the team on board with the business, and do they want to stay on board? Acquire all the records that you can, including financial, sales, marketing, and legal documents.
Tip 3: Negotiate Until You Can Make A Solid Offer
They want to sell and you want to buy. Both parties will have terms and conditions that they want to fulfill to seal the deal, so don’t be afraid to negotiate, possibly with the help of a legal team.
Tip 4: Get Your Financing In Order
The seller(s) might consider taking a note for a portion of the purchase price. Because it is a tax break for the seller, this can be used as a negotiating factor in the offer.
How much do you need to take out as a bank loan and how much do you have in earnest money? Will you need to procure funding from anywhere else or put up any assets as collateral? Also think about what you will need to spend money on at the beginning of the business once it is yours, for example, repairs or updates to the building or equipment.
Tip 5: Think About Your Exit Plan
Eventually, you will get to the point where you are finished with the business as well. Will you want to cash out and retire or move on to a different venture? Will you pass it down to others in your family?
Think about the best exit plan for your particular situation, and let this determine the amount you will pay to purchase the business upfront and invest in its growth during the years you are the owner.
The owning of a business can be a capstone to a life well-lived and done successfully, a source of great pride and joy.
Preparation and due diligence can set you up for success when purchasing a business, and provide the satisfaction that comes with being your own boss.