How to Buy a Business

Article Written By: clark990

Most of the time when people think about starting a business, they think about starting from scratch. But building a new business from the ground up can be a lengthy and difficult process. In many cases, buying an existing business is an easier way to get started. With an existing business, you immediately have a customer base, cash flow, and established business processes.

It can also be easier to obtain financing for buying an existing business. Of course, there are also risks to buying an existing business. Methods and equipment may be outdated; there may be new competitors, staff problems, or hidden liabilities. It will be much easier to see potential problems, and also to operate the business once you purchase it, if you choose a business type you are already familiar with, and that matches your skills and experience.

You should choose a business that does not exceed your management abilities in terms of size, staff, or financial flow. You ll also want to choose a geographic area and research labor costs, rents, taxes, and other costs of doing business, as well as the potential for sales in the area.

After determining the type of business, approximate size, and geographic area, you can begin looking for business opportunities. You can look for a business buy by advertising in newspapers or online, and even buy approaching existing businesses that match your criteria. You can also search online for businesses for sale. At this stage, networking is important.

Businesses you initially contact may not be interesting in selling, but could help you find other businesses for sale. However you find candidate business for purchase, you ll want to assemble an evaluation team, including your accountant, a business attorney, your bank representative if you will need financing, and potential one or more business advisors with knowledge of the type of business you re considering.

You can save considerable time and effort by working with a business broker. In exchange for a small percentage of the purchase price, he will help you find candidate businesses, conduct research and evaluate the businesses, and negotiate terms. Bear in mind that a business broker is no substitute for doing your own financial and legal review, but the broker can be very valuable in helping you obtain the information you ll need, and raising questions and issues that you may not have considered.

Your broker can also:

* Help to assess your background and skill to focus your business search

* Find business opportunities and make sure they meet your criteria

* Get answers to initial questions such as why the business is being sold, whether financing is available, and how much transitional management help the seller can provide

* Providing a checklist for reviewing business records, physical facilities, inventory, staff, and even competitors

* Working with your own accountant to evaluate the business and establish a business valuation

* Facilitating the purchase by negotiating terms, and by managing paperwork to meet business and legal requirements for the transfer of the business

* Working with you and the seller to put in place a transition plan to operate the business during and after the purchase process

Buying a business is a major step, but assembling a strong team of advisors, and working with a professional business broker, can greatly increase your chances of finding the right business, and making a successful purchase.

About the Author

Robert Clark is a member of the California Association of
Business Brokers, a California Real Estate Agent, and senior broker for Hub Synergies.

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