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Buying Tutorial

Do you dream of owning your own business?

Buying a business can be a complicated procedure, 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.

A business broker has many different types of businesses for you to consider and the knowledge and experience to walk you through the entire process.

Below you will find some helpful information as you consider whether buying a business is right for you.

businessmen shaking hands in office

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.

Mature businessman with glases calling by phone at the airport

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.

What to look for?

A business with a long track record means there are good reasons to be operating. 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.

The bottom line

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 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.

If you have any questions that we have not covered please don’t hesitate to contact me.

What should you look for when considering a business to purchase?

Unfortunately, too many prospective buyers want to know the asking price first and then ask how much money they can make.

These are the wrong questions to ask initially. You need to know how much cash the seller requires as a down payment. No matter how good the numbers are, there is no point in looking at a business if the seller wants three times as much cash as you are willing to invest.

Remember, the actual amount of money a business earns is usually much more than just the bottom line. A smart approach is to get more information on the business, and even make a visit, before ruling it out or getting too involved in the numbers. It’s all part of the learning process.

One of the most common questions asked by those who have never purchased a business (which is incidentally about 90 percent of those looking to buy a business) is how do you actually buy a business. There is no right or wrong way to buy a business.

However, it is important that you get answers to all of your questions and that you have all the information necessary to make an informed decision.

Business handshake congratulations on business deals.

Here are the steps to buying a business that over the years have become the most efficient and practical:

Get preliminary information on price, terms, income, cash flow, and general location. There is no point in continuing the buying process if the amount of cash necessary to buy the business is more than you are willing to invest. At this point, don’t worry about the full price. It’s important, but the key factor is the amount of cash that is necessary to buy the business. There is very little outside financing available such as banks, etc., for those who are purchasing businesses. The great majority of business purchases are financed by the seller. This is why the amount you are willing to invest is a key issue.

Also, the business has to be able to meet your basic financial needs. You always expect a business to improve under your ownership, but you have to be able to meet your living expenses as well as meet the debt service of the business. It is also important to remember that almost all purchase prices and down payments are negotiable. In fact, businesses generally sell for about 15 percent to 25 percent less than the original asking price. There is an old adage that says, “the more cash you are willing to invest in a business purchase, the lower the full price; the less cash you are able to invest, the higher the full price.

Insider Tip

Unless you are completely familiar with the type of business purchased, it is beneficial to include as part of the agreement that the seller will stay with you (30 days is fair, with perhaps another 30 to 60 days of telephone consultation) a sufficient length of time to teach you the business – at no charge. If you want the seller to stay longer, it may be best to offer to pay him or her a consulting fee of some type.

 

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.

Businesspeople Discussing Business using Tablet

If you have any questions that we have not covered please don’t hesitate to contact me.

Do you have other questions?

Be sure to visit Buyer FAQ for answers to the following questions:

  • Why should I buy a business rather than start one?
  • What is the real reason people go into business for themselves?
  • How are businesses priced?
  • What should I Look for?
  • What does it take to be successful?
  • What happens when I find a business I want to buy?
  • Why should I go to a business broker?
  • Do I need an attorney?
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