Buying an Existing Business: What You Need to Know

Starting a business is an exciting but challenging prospect. There is so much to think about and a lot more to put in place before you open your doors. Buying an existing business simplifies this process and lets you focus on running the business and not starting from scratch. Here’s what you need to know.

To Buy a Business or a Franchise?

When looking for businesses to buy, you might come across franchises for sale. A franchise gives you more guidance because the “parent” business will give you guidance to get you going. The main downside is that a franchise is very rigid, and running one does not give you as much freedom and control as buying an existing business does. 

Buying a Business

When you buy a business, you take over the ownership of the business. This means you are responsible for everything, including payroll, investing in the business, hiring, and keeping the business going. Once the deal is done, you will already be assured of an established customer base, some fully-trained employees, and defined expenses. It is also vital that you already have a vision in place so that the business does not spiral out of control. If you do not, you might need some external guidance.

Before Buying the Business

Although every business is different, there are a few steps you should take before you buy any business:

• Quantify the investment – The two most important things to consider here are how much you are willing to spend to buy the business and how much you will spend managing it. You can do this by looking at the business’s financial records, which will give you a clearer view of the business regarding things like income and expenses.
• Understand the business – You need to look at the business as a whole and understand everything you get with the purchase. This includes things like leases, inventory, cash flow, contracts, and payroll. When you ask the right questions and get the right answers, you will be in a better position to run the business.
• Consider your skills, interests, and lifestyle – If you have a firm understanding of your skills and interests, it will be much easier to pick the right business. For example, if you like talking to people, a customer-oriented business could be right for you. If you are experienced in one specific area, buying a business that fits in with your experience will make it easier to keep the business going.

Do Your Due Diligence

Once you have a business you would like to purchase in mind, you should find out everything you can about the business, both from a financial viewpoint and in the overall business landscape. The first thing to consider is permits and licenses. You need to know if you need to apply for new ones or whether you will get them from the seller. You also need to learn different zoning requirements as these may affect how you do business. If you are getting some real estate as part of the deal, you also need to check the environmental regulations in the business area.

Lastly, you want to find the value of the business. There are a few methods you can use to determine if the business is a good opportunity. Consider the return on investment, the business’s cash flow, how many tangible assets the business has as well as the value of intangible assets.

Expanding the Business

When you buy a business, you need to think about how you can expand the business. This involves finding new entities to work with so that you can increase sales and grow the business. Some of the entities you could look to work with include other businesses and the government. Other businesses will help get your products on more shelves, bring you more customers and give you more exposure through their advertising platforms. Be ready to do the same for them. Look for software for franchise management to expand your business.

If the business is not already doing it, you should try to do business with the government. Government tenders and contracts usually last for long and can give the business the cash injection it needs to keep growing. Ideally, you should understand the government’s procurement procedures, know about existing public contracts, and previous bid proposals. Doing this will put you in a better position to get the government’s business. All this information can be requested under the Freedom of Information Act. 

Once you have the right documents and information, you want to learn as much as you can about the people on those documents. Public records can enhance the information you got from your request. Platforms like Public Records Reviews, which you can visit at publicrecordsreviews.com, have the tools and resources you need to find this information. All you need is the person’s first and last name, which should be on the documents you got above, and you can find all their publicly-available information.

Buying a new business is an exciting prospect for any investor. Ensure you do your due diligence after you decide on the business you would like to buy. Next, find new avenues where your business can expand to give the business a new lease on life.