Prepare Yourself to Buy a Business

Many business owners want to get into the business world by purchasing an existing business rather than starting from scratch. While starting your own business can be very rewarding, the risk is also very high, even for experienced business people. For this reason, purchasing businesses that are already making a profit can be a very wise choice. There are some important factors you must consider when you buy a business. Location is important factor of buying a business.

The following steps help to buy a business. These are essential and important steps and you should know about these.

What type of business would you like to buy? You need to make a decision what kind of business you want to be in. Otherwise few things will happen with you. First, you will be looking for a long time in a very wide circle. It is hard to get a grab on a good business opportunity when you have no idea where you want to be. If you are all over the place, you are not ready to buy a business.

Another, the people who will most likely be helping you like business advisors, business brokers, etc, will not want to be around you for long. They will be spinning their wheels with you and will quickly put you at the bottom of the list. Even sellers who are attempting to sell on their own will get annoyed with you very quickly if you bombard them with questions but otherwise don't seem too interested in their business.

Do you want a partner for buying a business? Partners are necessary for two things. Either they will supply you with capital or they will provide you with skills you may not have. The latter is a better reason for a partner and a combination may work as long as you are going in with an even money 50-50 deal. If you picking a partner based on their bank account, might be possibility of problems within 12-18 months.

Running a business by yourself, especially for the first time, is a frightening proposition. But having a good accountant, lawyer and a business advisor is the way to go. At one point or another, even your best friend will turn on you as a partner. You are better off having someone that covers your shortcomings as your employee, along with a deal to give them a small piece of the pie while they remain an employee. Having a partner or two holding a large chunk of the business over your head will quickly stifle you and make you regret the purchase.

What kind of buyer are you?- There are mainly two types of true buyers: those that appear only for high cash flow, those that look for decent positive cash flow with the thought of using their experience to grow the business.

How am I going to pay for this? Please don't make the mistake of thinking that because you are buying an existing business that a bank is just going to hand over the money. Even if this business is doing extremely well, this most likely will not happen. It is true that buying a solid business with strong cash flow will help, but the business type, collateral and your background are very significant.

What can I afford? Usually the cash flow of the business is the best indicator to use for valuing a business. Many for the industry combined with factors such as location, years in business, profits trends, market situations, etc. are used to multiply against the cash flow. When this is the case, the buyer and seller will be closer to being on the same page for determining a fair price.

Assurance to buy- This sounds obvious but it really isn't. You will be wasting a lot of your time, seller time and broker time if you are not entirely sure you are ready to buy. In addition, you will waste money if you get an advisor involved to help you determine if this business is a fit and worth purchasing without being mentally ready and committed. Business seller or broker is not going to give you much financial and business information unless you are committed enough in the buying process.

Buying a business is not simple but buying the right business for you is if you are prepared. You should really consult with business advisor and one with business buying experience.