Do you dream of owning your own business?
Buying a business can be a complex process, from finding the right one to working out all the details required for a smooth transfer of ownership.
While there is no such thing as the “perfect” business, a business broker knows the importance of finding one that fits your needs, talents, skills, and lifestyle.
Below you will find some helpful information as you consider whether buying a business is right for you.
For Business Buyers
Going into business for yourself is a big step, one that can be full of apprehension and even fear. Almost 90 percent of all those who purchase a small business have never owned a business. Most of them bought a business that was different than what they had been looking for. These buyers had the opportunity to explore the marketplace and subsequently found a business more to their liking. In most cases, the seller financed the sale.
Most buyers are seeking to obtain the following when considering the purchase of a business:
Pride in the service or the product
Flexibility
Income
Control of own destiny
Recognition
Security
Privacy
Status
Customer and employee contact
As you begin your search, keep in mind that running your own business is more than a job; it is a lifestyle change. In most cases, it is a very big lifestyle change.
Usually, you will be working longer hours, making all of the decisions, and, as the expression goes, “you will be the chief cook and bottle washer.”
In other words, you will be doing all of the work from running the business to, in many cases, sweeping the floor and changing the light bulbs.
How Long Has the Business has Been in Business?
A business with a long track record typically means it has a history of success. It will be well known in the area, and people will be used to patronizing the business or using its services. The longer it has been in operation, generally, the better the business.
How Long Has the Present Owner Owned the Business?
The longer the present owner has been in business, the more likely he or she has been successful. People don’t tend to stay in business if they are not making money.
Why the present owner is selling?
If the owner has been in business for six months and is 37 years old, this could be a reason to be suspicious. However, the more valid the reason for sale, the more realistic the seller will be in considering your offer. Keep in mind that after five or six years or more, people do get restless, “burn-out” sets in, and people look for new challenges. Why the seller is selling is an important question – be sure to get a satisfactory answer.
Why Books and Records are Important?
Financial records are a good indication of how well the business has been doing over the years. Keep in mind that tax records are not designed to show the business in the best light; no one likes to pay more taxes than they have to, and business owners are no different. Generally, tax returns are a worst-case scenario. You need to be able to look at the expenses and discover which ones are non-cash items, such as depreciation and business use of home and vehicles. How important was that business trip to Las Vegas? A professional business broker can assist you to review these records and consider the pros and cons involved.
Keep in mind that financial records are only the history of the business. There are no guarantees that they will or can be duplicated or repeated. All of your profits are future. In the final analysis, the financial records of the business are an indicator of what the business has done; what you do with its future is up to you.
How to Determine if the Owner Has Reported all Income?
Being in business for yourself can be a daunting prospect. There are no guarantees. At some point, after all of your investigation is completed, you will still have to make that “leap of faith” that is necessary to proceed with the purchase of the business. You will have to work hard, perhaps even “tighten your belt” a little, and perform many different jobs to be successful in your own business. But, if running your own show, making your own decisions, not having to worry about job security (remember, no one can fire you from your own business), and just being on your own are important – then it sounds like owning a business is for you.
After taking this leap of faith, almost all business owners will tell you that they would never go back to being an employee.
For Business Buyers
The next step to buying your own business is to make sure it is the right move for you and your family. Owning one’s own business is still very much “the great American dream,” but it’s not for everybody. Here are some questions that you should ask yourself before taking the next step.
How long have you been thinking about buying a business?
What is your time frame to find a business?
What is your primary reason for buying a business?
Are you willing to invest a majority of your liquid assets in a business?
Are you independent enough to make your own decisions and be in control?
Is your family supportive of your owning a business?
Are you open-minded about different opportunities, or are you looking for a specific type or business?
Do you have reasonable expectations?
Can you make the “leap of faith” necessary to buy a business?
Do you need a guarantee?