Every year, more than 627,000 new small businesses open their doors. While many of those business are starting from scratch, some of them simply switch to new ownership.
Buying a business allows you to run things on your own without having to build the company from the ground up. But before you buy an existing business, you need to make sure it’s the right fit.
Ask yourself these key questions before buying a business.
1. How Successful Is It?
Before you buy a business, whether you’re looking to be the sole owner or are buying into a business with partners, you want to make sure it’s successful.
Find out what the average profits are. Look at the expenses the current owners face each month. And consider how much growth potential the company has.
If the company has a solid history of profits and is on track to grow over the next few years, buying the business may be a good idea. But if it hasn’t been successful or the industry isn’t in-demand, proceed with caution.
The last thing you want to do is buy a business that’s going to put strain on your finances.
2. What’s the Reason for Selling?
One of the first steps to buying a business that every prospective owner needs to take is finding out why the original owner is selling in the first place. The answer will vary from seller to seller, but there are a few red flags to watch out for.
If a seller tells you they’re looking to retire or just want to exit the industry, buying the business is worth considering. But if a seller tells you that they’ve dealt with several lawsuits or haven’t been able to make a consistent profit, only buy the business if you’re comfortable dealing with those challenges.
3. How Much Work Does the Building Need?
Getting an inspection is an essential part of the process. If you’re truly interested in buying a small business, find out what the building’s overall condition is like and get any essential equipment inspected for wear and tear.
You can use any damage or problems as a way to negotiate a lower price.
Once you do close on the sale, you’ll want to get those issues fixed as soon as you can. According to AD Painting & Decorating, letting a professional handle everything from equipment repairs to giving the building’s interior a refresh is the best way to protect your investment.
Buying a Business Is an Investment in Your Future
If you’re thinking of buying a business, take your time and research each company you’re interested in. Meet with the seller and ask them these essential questions before you agree to anything.
When you do, you’ll be able to make an informed decision that will work for your financial goals.
Once you buy the business, you’ll want to find ways to put your personal touch on it. Check out our latest posts for more tips to help you make your new business truly your own.