"Tips for Buying an Existing Small Business"
Before you start your search for a small business for sale you will need to determine what type of small business you believe you are qualified to run and would enjoy owning.
This should be based on your own skills, interests, personality and location (unless it is an online business). Getting over this first hurdle will help you determine which type of small business will provide you with the life style you desire, and hopefully turn a profit in your new business venture.
Buying a small business should be the final step in a process that begins with self evaluation and a sound financial assessment.
Once you have established a budget and the location you would like to be in, you can now start searching for a business for sale. A good place to start would be online at websites or you can always seek the advise from a business broker in the particular location you are interested in. Also, if there is a good business opportunity in another location, don't exclude it because it is not in the exact location you desired. If it is only a 30 minute drive and a great opportunity, then you should seriously consider.
In most metropolitan areas, the Sunday papers will have a large 'Business Opportuntiy' or 'Businesses for Sale' section allowing you to contact owners directly. Alternatively, you can place an ad in the 'Businesses Wanted' section stating that you are in the market for buying a small business.
Buying a small business which is already established, is always easier and safer then starting a business from scratch.
Statistically a large number of start-up businesses will fail within the first 12 months, with those surviving often being sold to have their new owners make the real gains. So let the hardened entrepreneurs take the risk, develop the market, and find out what works and what doesn't. When buying a small business you are potentially getting the following:
- An existing customer base
These are the people or businesses that already do business with you. This means cash flow from day one. - Accepted products and/or services.
They have already been developed and accepted into the market place. - Existing employees
Experienced and skilled staff who understand the business and it's customers, most valuable to any going concern. - Operating Systems
These are key in any business activity. How the business operates, what keeps the customers coming and the cash flowing? This ties everything together. It's your business formula developed by the previous owners; it may be perfect, or it could be in need of major changes. - Business History
The previous owner has operated this business and will be able to show you it's financial records, it's cash flow, sales and expenses. All this lessens the risk to you and your bankers, showing the companies performance and providing you with a platform on which to build.
Before starting out decide what you want, what your objectives are, and understand your strengths and weaknesses. Plan the process.
Business Brokers are another option when considering buying a small business. While business brokers usually represent sellers, Business Brokers are also able to inform you of business opportunities you might otherwise have missed.
Please make sure you do your homework when seeking advice from Brokers, and make sure they are a registered business and have a healthy reputation within the local community.
When purchasing any business always seek professional advice from your solicitor.
This tutorial was written by Peter Watson, CEO of Business Trader.
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