Are you looking to buy a business?

Are you looking to buy a business?

Buying a business can be easier and more affordable if you use the business assets as part of the purchase process. You will become the owner of these assets after you acquire the business. This will be to your benefit in advance. You may be able to obtain financing for the assets you want to purchase from banks or other lenders. If you are applying for finance, make sure you understand any liabilities you may have.

Create a cooperative. As the co-op model regains popularity, it is a good option for those with a limited budget. Buying a stake with other investors could lower your outlay significantly. However, you must ensure that the partnership agreement with the other investors is secure.

Consider franchising. Franchising is another great way to acquire an existing business infrastructure with limited resources. All around the world, there are a huge number of franchisors that can provide the opportunity to tap into a successful brand.

You might be considering business names as part of your decision to buy a company. Maybe you already have an idea, but you aren't quite ready to get started on your project.

From behind your desk, you can do your due diligence. As part of your due diligence, you should act like a real investigator and collect information using different sources, such as financial statements, annual reports, (former) employees, industry experts, suppliers, past customers, and investors. There is no doubt that you will have to get out in the field to collect this data to confirm or refute your assumptions, such as accuracy etc.

You need to go out on the field to gather intangible data. This includes the following: a company's image, an organization's culture, the quality of its product inventory, the loyalty of its customers, customer satisfaction, how the company is perceived by customers, etc.

Financial data for many small companies can't be retrieved easily due to the lack of information technology systems. This reflects on the company as a whole. To understand margin, discount, and revenue trends, go into the raw data. You can't do business without numbers!

Value is a question. Business valuation can involve any number of methods, but the truth is that it is more of an art than a science. You would be well advised to talk to reputable Business Transfer Agents (BTAs) in the locality or business sector you are searching for once you've completed some preliminary market research (and assuming you haven't been intimidated by the likely cost).

As BTAs primarily act for those seeking to sell a business, a good one will understand the potential benefits of engaging with those looking to buy a business, including the potential for some matchmaking. A suitable business opportunity may be unknown to them, before it is released to the market. As well as knowing businesses' realistic market values in their area, BTAs will also have a clear understanding of profit-to-earnings ratios that will go a lot beyond standard profit-to-earnings ratios.

What is your comfort level with risk?

Risk is inherent in all businesses, but some are more risky than others. At what risk level are you comfortable? The business world is filled with external risks which you cannot control. For example, what if your competition opens up shop right next door?

Would your service be obsolete or out of date if technology advances?  How about a recession?  Choosing to let others buy from you using credit will be a risk you can control.  However, the level  at which you tolerate risks and potential risk can affect the success and potential success of your business.

What business are you interested in purchasing? It may seem odd to ask such a question, but you have many different options available to you.

Many entrepreneurs purchase a business for more specific reasons, in addition to their general ambition for success. Depending on the reasons, these may consist of a desire to gain access to particular markets, databases, or supplier contracts, a need to acquire specific knowledge or intellectual property rights such as branding, software etc, or could be a calculated decision to buy market share from a competing company. Based on your desired outcome, your motivations will dictate what you should buy and whether you should buy an asset or a business.

Experience – a good starting point to consider is your professional experience to date. How did you work in previous industries?

You don't necessarily have to purchase a business in the same industry – but it helps if you bring over some transferrable skills. For example, if you've worked in cafes, your experience will readily translate to the hospitality industry – which includes bars, restaurants, and to a lesser extent, bed and breakfasts or hotels.

Any business that you run will require some skills. If you've always been an accountant, for example, your skills apply to most sectors – accounts are an indispensible part of any business.

List out your past experiences to help you narrow down your choices. By working for a short time in many industries, rather than specializing in one or two, you'll have a better idea of the range of fields in which you excel and do not excel.

You may be able to eliminate many sectors from your consideration if, for instance, you dislike office environments.

You can send an inquiry to the owners of a business that you're interested in to find out more.

Now is the time to narrow your search further if you have decided which sector is best for you – or if you are still open-minded. Browse businesses for sale and you may find that the choice can be overwhelming – you may find that there are thousands of businesses for sale in the category you are interested in.

Recommended business resources:
Fastkorp
Forbes