Purchasing a business can be a daunting task. That’s because a business has many moving parts and operations in place that you will have to be expected to manage once you become the new owner. It can be very intimidating. But if you take a look at our blog on the pros and cons of purchasing a business , you will find that while intimidating, it can be a very rewarding process both financially and personally. But how can you get started?
There are tens of millions of small businesses around the world today and thousands upon thousands of them are for sale. With thousands of options available, you need to start by narrowing your scope a little bit. Before you do any searching for business, you have to do some searching within yourself. One of the most attractive aspects of owning your own business is the unlimited earning potential and the freedom that comes with being your own boss. Many buyers get caught up in that and lose focus of the facts and their specific desires.
For starters, you’ll want to really think about the following questions and come up with solid answers for them.
How much money can you afford to invest?
This question is the elephant in the room but the answer to this will define your search parameters right from the start. The important thing to remember is that just because you have $100,000, for example, doesn’t mean you should invest that much. We usually recommend that you have a strong cash reserve that you do not initially invest in the business. This is just in case you need to supplement your cash flow or make inventory or equipment purchases. And on the other hand, just because you only have $100,000 to invest, doesn’t mean you can’t purchase a business for $500,000. There are several commercial and small business loan options available to buyers today that can help a qualified buyer achieve their dreams. Ultimately, the answer to this question will depend on your finances, of course, but will also depend on the level of risk you are comfortable with.
What are your interests and desires when it comes to purchasing a business?
If you are purchasing a business, it may very well be because you are unsatisfied with your current financial and labor situation. Of course, money is very important, but we would argue that your happiness is more important. We will always recommend that you get into a business that you want to be in and will enjoy working in, or at the very least won’t hate working in. A lot of the time, we are in the business of making dreams come true. So follow yours with a healthy dose of cautious optimism. Additionally, if you purchase a business you don’t enjoy there’s a greater likelihood that the business will not live up to your long-term financial expectations.
Assess your personality and skills. What are your strong points? Your weak points?
It’s critically important for you to honestly assess your personality and skills. If you are a good chef, maybe a restaurant is a good option for you. If you are a poor manager, it’s important to recognize that, as well. Maybe you want a business where you will not be managing a lot of employees. Do you like dealing with a lot of people or would you prefer to own a business in which you are working behind the scenes? When you come to these conclusions about yourself, it will help in your business search as you will be able to narrow your options even further.
What type of owner do you want to be?
There are many possibilities when it comes to the type of owner you can be. Many buyers make a business acquisition to essentially buy a job. These buyers will often work full-time in the business. Others want to purchase a business that has good management in place already and be an absentee owner, meaning someone completely absent from the day-to-day operations of the business. Maybe the business is just a strong investment vehicle and/or they purchase it for the lifestyle that it may bring. Perhaps what you want to do is something in between these two poles.
How soon do you plan on purchasing a business?
It’s not always the right time to purchase a business and sometimes what you are looking for is not out there based on your local market, your finances, current personal life, and so much more. And sometimes you need a change more than anything and would have made the purchase yesterday if you knew what to do. Whether you want to start today or wait for the more opportune time, it’s always best to have a conversation with a trusted business broker.
Once you are confident in your answers to these questions, you can begin your search. We recommend using a business broker as they will be able to help you find your perfect business and navigate the transaction free of charge. Here at Apex Brokerage, we have decades of experience in buying and selling businesses. We also have a legal team in-house that we take full advantage of with every client, which comes at no cost to you. You will always be protected when you work with us. Read the blog we did on how to make sure you’re protected in a business transaction! If you are looking to buy a business but don’t know how to start, we offer free consultations in person or on a video call. Call us today to get started!
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