When buying a business, there are some key steps to follow that will enable the process to proceed more smoothly.
Which Business to Buy
Start with deciding what type of business that would best suit you. You are most likely to be successful at a business in which you can make good use of your skills and experience. In addition, you will want to select a business that you would be passionate about since you would be investing not only financial resources but a good deal of time.
After deciding what industry you want to invest in, consider what size business to search for. Analyze your management skills as far as the number of employees, volume of sales, location, etc. Of course it will also be necessary to explore financing options as well as your own financial situation. This will enable you to see what you will be able to afford to pay for a business.
Take your time in this business buying step to ensure that you are researching all avenues so that you find the best overall fit. Consider enlisting a business broker to help you. Also, there are many resources on the Internet that can help you with this process.
Investigate the Business
Once you find a business that you believe would be the best match, there are several items to consider. Be sure to do extensive research on the business and its history. Discover the true reason the business is for sale by speaking with people who are familiar with the company such as local realtors and other business owners in the area.
Before meeting with the seller, do some reading and/or speak with a professional as to what is appropriate to say or not to say at this point in time. The seller will also be considering how the buyer comes across as a prospective owner of his/her business.
When you meet with the owners, you will need to make sure you find out what is included in the asking price. Also, determine if the assets are clear of debt.
Examine the financial statements of the business, preferably with the assistance of an accountant in order to determine the past performance and the stability. If you are not certain that you are getting a clear picture ask for the business records and have your own audit done.
You may also wish to ask permission to sit in on the business for a few days. This way you can get a good feel for what it would be like to be the owner of this operation.
Pricing and Financing
The next business buying step will be to determine what the business is actually worth. Analyze the worth using several methods including book value, modified value and replacement value. Find out how the seller derived his/her price and compare to your calculations.
Then make sure you can really afford the business. In addition to your own contributions, see what financing options are available including small business loans from banks and credit unions. Family/friends may also be willing to invest.
While investigating the business, you may have a contract attorney draw up a letter of intent (LOI). This is a document that is a formal understanding that you and the seller are in negotiations, not a binding contract. Therefore if you should find anything you dislike, you don't have to go any further in the process.
Finally if all goes well, have your attorney draw up a final contract. The attorney will specify all the details of the deal. Then you will be ready for closing.
After all these business buying steps are completed and everyone signs on the dotted line, you will be ready for the next big step of owning your new business.
About the Author BusinessMart.com has become the fastest growing business for sale search engine, helping buyers and sellers of small businesses and franchises. BusinessMart.com has many resources to help you on your journey to start your own business, sell your existing business or open a franchise. BusinessMart.com has thousands of businesses for sale in the US and Canada.
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