Important Advice for Purchasing a Business – Part One
Buying a Business
Buying a business can take time, energy and extensive research to make a successful decision. Prospective business owners can either start a new business from the ground up or purchase an existing business which can be less risky, but it is important to do your homework to ensure that you buy the right type of business for you and that you pay a fair price for it.
Where to find a business to buy
Businesses for sale are often advertised in traditional print media and online, but business opportunities can be misleading. That said, it is important to do your due diligence before purchasing. If you’re unsure which resources to use, try reading trade publications or commercial investment magazines or talk to a broker who specializes in a specific industry. Personal and professional connections also go a long way in the business, and networking can help get the word out that you are interested in buying a business.
What kind of business should I buy?
When purchasing an existing business, there are two options: franchise or traditional (independent) business. There are advantages and disadvantages to both options, so it is important to do your research to determine which is the best fit for you and your professional goals.
- Proven track record — This is an established business with a proven concept; there is less risk and less initial capital required than starting a new business. If you decide to sell, it may be easier to find prospective buyers for a known entity and brand model.
- Built-in customer base — People know what to expect from your business because they know the brand and trust the product or service.
- Setup, support and training — Operating under a parent company means having proven business infrastructure and processes in place, from equipment to uniforms to corporate advertising, rather than having to develop them on your own. Other franchisees within the company can be a source of support when you are starting out.
- Established rules and regulations — When you operate a franchise, you have less control over the operations than if you own an independent business; you also have to pay a percentage of your revenues to the parent company, which reduces overall earnings.
- More control and responsibility — You have the autonomy to set your own rules, but the success or failure of the business rests solely on your shoulders.
- No fees or royalties — You keep all of your earnings without sharing any of the profits with a parent company.
- More opportunity and risk — You can sometimes find a business that may not be doing well but has potential. If you are willing to do the work, you may reap the rewards. However, you must be prepared if things don’t turn out as planned.
For more, read: Important Advice for Purchasing a Business – Part Two