How To Buy A Business
Buying an existing business is the fastest and safest way to get into business. Much of the risk has been already taken by the current owner. Your job will be to acquire the business that best fits your skills. Take an honest assessment of your strengths and weaknesses and seek the opportunity that best utilizes your strengths.
After you have decided that you are going to buy a business, you need to accept business risk. Learn how to value a business and its true value under your ownership. Every business is unique and because capabilities differ from person to person in a given business, what is expensive for one person may be a bargain to another.
In the United States, approximately half of all business sales are accomplished through the services of a business broker. Only one of six small businesses that are advertised for sale will sell for more than their liquidation value. This leaves abundant opportunity for the buyer that knows how to value a business and understand their unique skills they bring to a given business.
Business owner ship is perfectly suited for entrepreneurs who want to build a career or wealth by owning their own small business. Here are the steps to buying a business that over the years have become the most efficient and practical:
Key Points to Business Buying
- Understand how to value a business. Business valuation varies by industry, but earnings and reliability of earnings determine what a buyer will pay for a business. If a business is dependent on the owner, key employee or a single customer, the reliability of earnings will come in to question. Many factors affect business valuation but the easier and safer it is to make money, the more the business will be worth.
- Learn how to analyze new business opportunities and negotiate a business purchase or sale. Appraise your own experience, skills and background and decide if this business is a good fit for you. Don’t overlook service businesses and e-commerce businesses.
- The seller of an existing business will often provide some of the financing but expect not to come with your won cash. Don’t lose credibility by proposing unrealistic terms that will make it difficult to come to reasonable terms when a deal might be possible.
Do your due diligence! Know the balance sheet and P&L statement as if it were your own. This is the only way you will know what you should pay for a business. Buying a business is stressful and requires hard work, but the return is priceless.