Buying the perfect business starts with choosing the type of business that's right for you. The best place to start is to look for an industry that you are familiar with and understand. Think carefully about the types of companies that interest you and which ones are best suited to your skills and experience. Also consider the size of the company you're looking for, in terms of employees, number of offices and sales. Next, identify the geographic area where you want to own a business.
Assess the labor and costs of doing business in that area, including salaries and taxes, to make sure they're acceptable to you. Once you've chosen a region and industry to focus on, research all the businesses in the area that meet your requirements. Start by looking in the classified ads section of the local newspaper, under the heading Business Opportunities or Businesses for Sale. You can also post your own “I want to buy” ad describing what you're looking for. Remember that just because a company doesn't appear on the list doesn't mean it's not for sale.
Talk to business owners in the industry; many of them may not have their businesses for sale, but they would consider selling them if you made them an offer. Put your networking and business networking skills to work, and you're likely to hear about other companies that could be good prospects. Think realistically about the type of business and lifestyle that works best for you. Often, the most logical thing to do is to choose an industry that you're familiar with. If you already work in landscaping, web design or catering, you may be in a better position to run a business that operates in the same field and to evaluate if an existing business is a good buy.
Browsing the websites of companies for sale can give you an idea of the companies that are offering for sale and the prices they are asking for. Consider your budget and how much time you really want to spend with the company: daily business management can be hectic and time-consuming. A specialized sales agent can help you identify the company that best suits your needs and then guide you through the rest of the buying process. Like real estate agents, commercial brokers charge a commission (usually around 10% of the purchase price) that is normally paid by the seller.
Determine what type of insurance coverage exists for the operation of the company and all its properties, as well as who is the insurer and the company's local representative, and the amount of the premiums. Balance sheets, income statements, cash flow statements, footnotes, and tax returns for the past three years are all key indicators of a company's health. No matter what a business broker, business salesman, or anyone else tells you, there's always time. You may want to try several methods to discover companies so that you can find the best option for your investment objectives.
Some of the most common challenges you may encounter include a poor business plan, excessive business debt, location issues, brand confusion, outdated equipment, and staff shortages. If the seller finances the purchase of the company, their trading statement must include a payment schedule that can be deducted from the company's income to pay for it. Companies generally sell at a higher price when the economy is expanding and at a much lower price during recessions. And there is no need to reinvent the wheel (establish new procedures, systems and policies), since a successful formula for managing the company has already been established. On the bright side, it may be easier to obtain funding for an existing company than for one that has not yet proven to be profitable.
A person who buys a company has two options for structuring the transaction (assuming that the transaction is not a merger). The most common way to judge a company is by return on investment (ROI), that is, by the amount of money that the buyer will make from the company in profits after paying off debt and taxes. This tutorial was excerpted from the Small Business Encyclopedia in Start Your Own Business magazine and Entrepreneur Magazine. Small Business Loans Start-up Business Loans Average Interest Rates Business Loans for People with Bad Credit Business Line of Credit.
It's often better for a company to postpone year-end earnings until the following year by spending a lot of money on advertising during the last month of the fiscal year.
