What To Consider Before You Buy Your First Business

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What To Consider Before You Buy Your First Business

Planning to do business but hate the nitty-gritty of setting up a new business? Why not buy one?

Instead of starting a business, many investors choose to buy an existing one. The top reason is that an existing business already has established systems and processes, and ongoing revenue. Although it seems to be a costly investment, buying your first business cuts to the chase and leads you directly to profit-taking. And if executed properly, this investment can be a very lucrative deal.

But before you even read any business brokerage sites, you may want to know some very important things to consider before you purchase your first business.

1. Your business experience

Be ready to spend a great deal of time evaluating your expertise. If you feel you still lack in experience, you might want to gain experience before starting your own business.

Know what areas you’re good at and review your past business experiences. Do you have any hobbies or interests that might be turned into a possible business venture? Do you have any business or financial experience? Would you be willing to explore other sectors or industries? Running a business is not a one-time deal. You will have to devote your time and effort to it, so it is best to find a business that is close to your heart.

2. Business location

Geographical location is an important consideration especially when buying your first business. Unless you are willing to relocate, the business that you should purchase should have a market in your geographic region. Study your area and know what industries or sectors are feasible in your location. By choosing a sector that is marketable in your area, you will not have to worry about looking for clients.

3. State of the business on sale

Orlando business broker Cress V. Diglio recommends that first time business buyers carefully vet the business they consider purchasing. You should check the status of sales, revenue, accounts-receivable, financial stability, and other financial aspects of the business. It is also important to know whether the employees welcome the change in ownership and whether the patrons will remain after the acquisition. These are essential aspects that require a thorough investigation. If you have limited business expertise, it would be great to get input from financial experts.

4. Amount available for purchase

Aside from the amount of assets in the business, the selling price of a business will depend on many other factors that include the seller’s expectations, the industry and the negotiations. Normally, you should plan to buy in cash at least one-third the value of the business on sale. In some cases, seller financing is available wherein the seller continues to receive payment over time and retains the note. This can all be threshed out during the negotiation with the target company.

5. Consider franchising

Another available option is to purchase a franchise. Franchising has a lot of advantages as discussed in this post. Unlike in a simple business acquisition, in franchising, the franchisor still has motivation (which is the royalty fees or percentages from net sales) to assist you as you start the operations. With this vested interest in mind, the franchisor tends to be more than willing to help you succeed through training, ongoing support, and even financing. But just like buying a business, you need to carefully investigate the franchisor. With so many competing franchisors, you have many options to choose from, which allows you to compare the products, performance and support of potential franchisors.

Buying your first business is indeed a major decision – but once you’ve acquired it, you get the chance to be an entrepreneur in an instant! Just make sure to practice due diligence every step of the way!

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