I suppose that you are now in a 9-5 job and planning to leave the job for various reasons. As a result, you will start to think about owning a business. First, consider why you need a company because it is easy to make money from or have the idea of relaxing. Nevertheless, remember buying a business is not something that you can rush into; therefore, you need to do the following in detail.
Therefore, before you make your final decision have to conclude whether to buy a business or set up a business. In this guide, I am going to give you beautiful points to use to buy a business.
A short story about my mistakes
I write this guide due to the significant loss that I incurred due to the errors I made when I bought the business in the year 2000. I think all that I did just prepared a cash flow; even that was because of the funder. I messed up everything and ended up in a significant loss from the day I bought that business. It had a long-term effect on my finances because I decided to share my bad experience purchasing a business.
The vital business buying points to consider before you buy the business.
How will you find about the business of your niche is there for sale? Is it possible to look in your area for any business for sale?
Ask the help of your friends and relatives, or try it with the help of a business broker?
Select your niche and make sure that the product or service will solve the people's problem.
Your experience with that niche
Will, you able to invest in yourself to gain more experience.
- What is your budget?
- Baseness loan
- Venture capital
- Seller financing
Are you going to stay in your job?
Have you thought about your emotional, physical, and financial help?
You have answered all the above questions, and still, you are thinking about a business but have decided to buy a business.
Now you will have more questions about your future business.
What are the things that you have to look for when buying a business? First, I will assume that you have selected your niche and location. Now the marketability for the product sold a question in that business. Have you thought about the competitors?
The reasons that the previous owner to sell the business?
There could be many reasons such as the following
• Moving on to buy another more significant company
• Changing the industry
• Maybe the market didn't make much money
Then ask the entrepreneur what they will do to improve sales and profit if they decide to stay in business. The answer you get will help you to save a lot of time researching to enhance sales. Will you get permission from the owner to visit the business couple of times to assess the customer base and their product demand? Therefore, you have to make a couple of visits before committing yourself to buy the business. However, a more natural way to do that is to check the industry's reputation, like customer reviews and any other issues if the company has faced in the past.
How have you made sure that the price is right for you? Negotiate the price lower and higher price that is the limit?
After all this, it is necessary to get the valuation done for that business. It would help if you had an accountant to do the cost for you. You also have to make sure that you prepare a realistic budget to match the business's price. A business plan could be of great help to you. Make sure that you are buying the assets and not the business.
Ensure that stock accounts are in order and value of the property, then accounts receivable and account payable need to be checked. In accounts receivable and there is no guarantee that all the customers will pay in full; if that is the case, there will be bad debts. Therefore, you need to find who will be responsible for that collection of overdue payments. Find out all about the business taxes, payroll, and year-end submissions.
Accountant checks the previous year's accounts to know the profitability of the company. Having done all the above, you have to ask yourself whether it is feasible to maintain the business at the same level.
How did the previous owner run the company? Did the business have a team run the business whether the crew was in house or volunteering, family help or virtual assistants help? If the market had staff to run the company, it would not be advisable to change the team and employ new staff. You have to find out whether those staff will stick around, as they are the people who are aware of the whole process of the business. If you do that, you might lose some of your customers and cost you money to train the new staff. Besides, you might lose sales during the training period. Make sure that the owner stays around the business for a while.
You must hire an attorney to check the contract for you; the valuation depends on the remaining years in the rental. There could be a possibility that the property owner might increase the rent for the business's new buyer. The attorney becomes responsible for drafting the letter of the sales agreement, lease transfer, then whether the property owner is holding a security deposit for the company's assets. Also, check whether the owner included the warranty in the agreed price of the business.
Buying a business is not an easy task; you cannot rush into making any. Therefore, you need to take enough time to select the industry, location, funding. Once found a business get to know the market very well. Speak to customers, staff, and do a google search to see the reputation of the company. Then make your initial offer and do the necessary negotiations with the owner. Lastly, select a reliable accountant and an attorney to check and approve all the required documents and allow you to go ahead with your purchase.