Buying a business can be an excellent choice and entrepreneurs usually find it is much easier to buy a business than start one from scratch.
It has been said that starting a business from scratch is one of the hardest things someone can do, and most business owners who have started a business know just how difficult it can be. Quite often, people spend years and years working up to owning their first business and then after they have a little success, after they realize how much money it really takes to start a business.
The problem is that they need more money than the business makes, so this is where many people turn to borrow from friends or family or financing with credit cards – either of those can lead down a dark path of potential disaster.
These five things to consider can help you decide if buying a business is the right choice for you.
Unless you can buy a business with cash or your savings, then you’ll most likely need to get financing.
Lenders like stability and borrowers who will pay them back, so you if you are buying a business that already has a good cash flow you really can’t lose.
Is this a niche market, or is it flooded with competition? Do you know your target market inside and out?
If not, you should probably do more research before jumping in because it’s likely that someone else has already done the leg work for you.
Not all sales are final, so don’t be afraid to try and negotiate for a better deal.
It may not work, and you’ll be back at square one, but it’s better than walking away empty-handed or having to borrow more money that puts your family in jeopardy.
Do you understand the business model of the company you’re considering buying?
If not, you’ll most likely need to get started working there for a few months or hire someone who is an expert in that area. You will need to make sure you choose a business in an industry that matches you skill set. The knowledge for running a restaurant can be much different than that of a car wash business.
If you do not see strong financials, it will make sense to investigate why they aren’t doing well and what changes need to be made before you take over. But, on the other hand, if there’s no way to turn things around, then why buy the business?
If you follow these five things to consider when buying a business, you should make an educated decision.
Just remember that buying a business is not like purchasing other products and services; you will be purchasing cash flow and it is important that the business you are purchasing is a well oiled machine that is generating enough income for you and your family. Making the decision to buy a good business with strong earnings could very well put you and family’s financial future on a path to financial freedom, so you must give as much consideration as possible to the potential purchase.
It may also be important to understand the advantages and disadvantages of purchasing an existing business.