Download
1 / 17
170 likes | 187 Views
Are you thinking about buying an exiting small business? Here is a step by step guide to help understand what you need to consider before making a purchase. For more information, visit at https://www.onlinecheck.com/blog/small-business-resources/buying-an-existing-business/
E N D
AN ULTIMATEGUIDE ON HOW TO BUY AN EXISTING SMALL BUSINESS www.onlinecheck.com
BUY AN EXISTING SMALL BUSINESS Buying an existing small business means taking on the opportunity to have an established business without starting it from the scratch. More than 500,000 businesses are purchased every year and the number expected to increase in the next few years as baby boomers starting to sell their businesses. Before you jump into the quest of buying a business, there are certain things you need to understand as a business owner to avoid buyer’s penitence. Here is a detailed guide on how to buy an existing small business along with its benefits and drawbacks. Another benefit of buying an existing business is that you don’t have to bear the pain points and costs of starting a new business. However, there is a long and complicated journey from buying a business to closing new deals. www.onlinecheck.com
Step 1: Assess What Business Type Suits You Buying an Existing Small Business Guide Step 2: Look for Businesses on Sale Once you’ve decided to buy an existing small business, then it’s essential to ensure your selection is perfect for you. For starters, choose one you’re more passionate about and have the knowledge and little experience so you can easily manage it. Also, knowing what questions to ask while buying a business is also important when making your choice. Here is a step-by-step guide to help you get started: Step 3: Find Out Why an Existing Business Is on Sale Step 4: Zero in Your Business Choice Based on Your Resources Step 5: Due Diligence Matters Step 6: Evaluate Business Market Value Step 7: Get Business Funding to Purchase a Business Here are 8 step to help you buy an existing small business. Step 8: Close the Deal www.onlinecheck.com
BUY AN EXISTING SMALL BUSINESS Step 1: Assess What Business Type Suits You Start with assessing the types of businesses you can choose. Concentrate on the most important elements like your desires, interests, abilities, and knowledge. Buying a business that coincide you’re your likeness and experience surely help put on the road to success. For instance, if you’ve been an electrician at a service station for some years, and decided you’d like to start your own service station. Or maybe you’ve been working on an idea for a long time that’s now trending in the industry. In all such cases, who better to buy the business than someone who knows it as familiar as you do? While buying a business for the sole purpose of financials alone, you should also familiarize yourself with the business’s extraneous goals as well. To conclude, the more informed and acquainted you are with the business type, products or services, clienteles, and industry trends, the more inventive and effective your new ideas will be. www.onlinecheck.com
BUY AN EXISTING SMALL BUSINESS Step 2: Look for Businesses on Sale There are abundance ways to look for business on sale that fits your criteria. Here are few places to get your search started: Meetups or industry conferences Online business marketplaces Craigslist ads Classified newspaper ads Network of small businesses Business brokers www.onlinecheck.com
BUY AN EXISTING SMALL BUSINESS Step 3: Find Out Why an Existing Business Is on Sale There could be many reasons why an existing small business is on sale and this includes a business owner decision of retirement or it may be a fundamental problem. The key here is to understand the business you’re about to buy is why on sale and exactly why it’s not working for their current owners. Before making a decision, ensure you properly understand the existing business challenges, failures, and upcoming opportunities. You also ask existing customers, employees, nearby businesses, to get an honest view of how the existing small business is performing. You can ask the current owners about the challenges they’ve faced, how they overcome the problems, and how those efforts progressed. While having a conversation with the current owner, ask yourself, “Am I capable to meet these challenges with better results?” www.onlinecheck.com
BUY AN EXISTING SMALL BUSINESS Step 4: Zero in Your Business Choice Based on Your Resources The next step is to finalize a business based on your requirements. You’ve considering many different businesses, but now it’s time to zero in on the best option based on your budget and resources. Your plan of buying an existing small business should include the calculation of your ideal business size, place, sales, workforce, and cost. Don’t just think of money spending only. Instead, look at the big picture: your time and commitments you have planned to invest to buy the business. The resources you’ll have to utilize largely depends on your industry experience and the people and processes already engaged. For example, if you are buying a retail shop but lack technical skills, you will need to spend time learning the industry or hire experts. www.onlinecheck.com
Business Licenses and Permits BUY AN EXISTING SMALL BUSINESS Organizational Paperwork and Certificate of Good Standing Step 5: Due Diligence Matters Local Zoning Laws Perseverance is important since you need to have all the needed information before buying an existing small business; being the most important step towards becoming an entrepreneur. Working with an accountant and attorney to ensure you have all the essential information at hand while moving forward. You should know the business’s financials as well as a legal negotiator to help you understand the process. Environmental Regulations Letter of Intent Contracts and Leases An accountant and attorney will surely help you collect and analyze the documents, files and agreements needed to make an informed buying decision. Here is a checklist of those must-have documents while considering whether to buy an existing small business: Business Financials & Returns Organizational Chart Status of Inventory, Equipment, Furniture, and Building Other Important Documents www.onlinecheck.com
BUY AN EXISTING SMALL BUSINESS Step 6: Evaluate Business Market Value The next step is to agree on a price for the business. At this point, many business deals disintegrate because both buyers and sellers often have different values on the business based on their pricing model, and many factors influences a business value. Use these three approaches to evaluate an existing small business while buying: Assets Approach To buy an existing small business that is not making profit or to buy venture capital businesses like manufacturing and transport. Earnings Approach To buy an existing small business that is making profit or have an optimistic projection of earnings. Market Approach Settling on a price based on the above two approaches. www.onlinecheck.com
BUY AN EXISTING SMALL BUSINESS Step 7: Get Business Funding to Purchase a Business Once you finalize the price for business, it’s time to get funding to make the purchase. There are many ways to secure capital to purchase a business. Here are six best options to finance your exiting business purchase: www.onlinecheck.com
BUY AN EXISTING SMALL BUSINESS Savings & Help from Loved Ones Buying a business initially out of your pocket is always an option if you can afford. Certainly, getting help from your accountant before exhausting all your savings is a sensible approach. Keep in mind that don’t use all the money to make the purchase since running a business requires capital, too You can also borrow money from your loved ones to make the purchase. While choosing help from your family members, you should understand the tax implications for family loans. Before taking cash in hand, make sure you have the family loan terms in writing and follow the IRS rules. www.onlinecheck.com
BUY AN EXISTING SMALL BUSINESS Types of Business Funding Debt Financing Lease the Business Sell Company Shares Seller Financing Get into Partnership Savings & Help from Loved Ones Most lenders usually require detail documentation to review your application including financial statements, tax returns, cash flow analyses, property valuations, and much more. This detail documentation will make your business acquisitions an ideal contestant for funding because lenders aren’t willing to work with risky startups. Buying business with a partnership instead of buying it solo will help you divide the payments for the business while you own that business. This not only help to cut costs, but can also benefit from the experience and skills of the person you bring on board Leasing an existing small business instead of buying it outright is another option to make the big purchase once you’re able to afford it. Explicably, not all sellers will agree to this option however, if you’re comfortable with leasing—even it may cost more eventually—you might as well ask. You can also borrow money from your loved ones to make the purchase. While choosing help from your family members, you should understand the tax implications for family loans. Before taking cash in hand, make sure you have the family loan terms in writing and follow the IRS rules. It’s a real estate agreement in which the seller (as a lender) manages the mortgage process. This way, you will get guaranteed income forthcoming based on your plan. Seller financing has its rules, specifically if you plan to use a different debt financing type Selling company shares can get you a big discount that comprises 50% or 90% of the business price by some measures. If possible, selling non-voting stock is best in order to retain business ownership. www.onlinecheck.com
BUY AN EXISTING SMALL BUSINESS In addition, if you’re looking for small business loans, here are some potential options to help you buy a business: Bank Term Loans Small Business Administration (SBA) Loans Asset-Based Financing www.onlinecheck.com
BUY AN EXISTING SMALL BUSINESS Step 8: Close the Deal Now you have find the right business, done your due diligence, finalize a fair price, and secure the funding, make sure you have all the essential documents and agreements ready before you make a purchase. Here is list of documents you should have in place: Franchise Vehicles Bill of Sale Adjusted Purchase Price Lease Bulk Sale Laws Patents, Trademarks, and Copyrights Asset Acquisition Statement Non-Compete Agreement Consultation/Employment Agreement www.onlinecheck.com
BUY AN EXISTING SMALL BUSINESS Benefits of Buying an Existing Small Business Proven business concept Here are some of the benefits of buying an existing small business: Low operating costs Easier to secure funding Intellectual property Is negotiable www.onlinecheck.com
BUY AN EXISTING SMALL BUSINESS Gravidient.Card Design Concept v1 Drawbacks of Buying an Existing Small Business Here are some of the benefits of buying an existing small business: 01. Higher upfront purchasing costs 03. Risk of a hidden problem 02. Unfamiliarity with the details. www.onlinecheck.com www.websitename.com
The Conclusion We hope after reading this guide, you will have a proper understanding of buying a business carefully, vigorously, and successfully. However, there’s so much involved in the process of buying a business, and you’ll be compensated when you’re finally running it. Good luck with your business endeavors! www.onlinecheck.com
