If you’ve ever considered owning and managing your own business, you may have also realized how risky it can be. Many small business owners found the economy too challenging over the past few years and decided to give it up for more profitable ventures, but that hasn’t deterred budding entrepreneurs from buying a small business. In fact, many believe that now is the best time to invest in existing businesses. If you ask a business broker or veteran entrepreneur to give you tips for buying a small business, the answers you get will be all across the board, but here are my top five –
- Analyze what you expect to gain from your new business. Are you looking for greater flexibility? Shorter hours? Unlimited income? Whatever you want out of the business, let this be your guide to finding the right opportunity. Owning a business can be a rewarding experience, but only if it is a good fit for your expectations.
- Conduct a thorough investigation of the business and its financial affairs. Pay special attention to any liabilities or long-term contracts and learn how these could impact the new owners. If you are new to entrepreneurship, use a business broker to help you learn more about what to look for and what to avoid before you invest too much time in it.
- Find out why the current owner is selling. This is one of the most important tips for buying any small business. Many small businesses go up for sale when the owners are retiring and their children have no interest in running it. However, be very careful with buying a business that has changed hands several times, or where a recent buyer is looking to get out quickly.
- Learn about the business’s problems. Every business has its share of problems, whether it is dealing with certain suppliers or aggressive competitors. Maybe they are threatened by advancements in technology or struggling to maintain regain a good reputation after getting some “bad press.” If the current owner tells you the business has no problems, they are lying.
- Does the company have growth potential or will any growth require a large investment by the new owners? If its customer base is shrinking, or the picture looks bleak for growth over the next five years, don’t think that you can take over and turn things around. Be realistic about your expectations for the viability of any business.
There are dozens of other tips for buying a small business, but everyone’s situation is different. Before you move forward with any acquisition it is important to do your homework. Start by searching in the online business directory at BizSale.com.