Taking over a company can be a nerve-racking experience, especially if it’s your first business. However, if you’ve given it a lot of thought and have determined it’s time to give it a shot, make sure you consider these things before starting.
Typically, buying a company is less risky and difficult than starting a new venture because you already know exactly how well that company is doing in the industry and where the previous owner left off. However, it’s not always that simple. Any number of things can cause a business to fail after it’s purchased. Take these tips into consideration before you buy a company so you’ll be on the right track when the time comes.
Why people sell their businesses
Before you buy a company, it’s important to know that most people don’t sell their business because it’s going downhill. Usually, an entrepreneur will sell his/her company for various reasons, but chief among them is that the founder has become invested in a new business idea. It’s not uncommon for someone to spend a lot of time growing a business and then decide they want to do something else. For you, this may be the perfect opportunity to take hold of their ideas and either continue with what they started or take it in a new direction.
Have an idea of what you want
There are a lot of business out there and they all operate differently. You need to have an idea of what company you would like to run as well as what you would be good at.
- Size: This is important. When you buy a business, you want to make sure you get something that you can handle. Small businesses cost less and they won’t have as many risks associated with them. Also, you’ll have a company that has room to grow in any direction that you choose to take it! However, if you have more funds available, you may want to invest in a larger company that has already established its place in the industry.
- Responsibilities: Depending on the company you choose, responsibilities can also vary greatly. If you choose a small company with few employees, expect to be spending more time hands-on with your employees. If the company is larger, you’ll be working with management, and will want to take time to get acquainted with other areas of the company.
- Culture: Another thing that you want to take into consideration is the culture that the company already has established. Does it resonate with you? Does it need work? Do you want to change it? These are all questions that you should be asking yourself.
- Industry: What are you passionate about? What fields do you have experience in? It’s important to ask these questions because you don’t want to look back five years down the line and find out you’ve been investing your time in a cause that you don’t care about.
It always helps to do a couple of internet searches for businesses in your area or your ideal location so that you have a better picture of what’s available to you before you really start diving into this and contacting owners.
Be financially ready
While purchasing a business can be an exciting opportunity, it’s important to not get so excited that you don’t first consider your financial situation and how that will impact your plan. There are several different models of business buying that you should be aware of.
- Seller financing: This will be a great option for you if you can’t pay for entire business up front and is offered by many business sellers. With this method, you will make payments over time with additional interest costs.
- Angel investors/venture capital: This is the joint-operation option that would make you operator of the new business while an investor helps you pay for the initial expenses for you to get up and running. If your business succeeds, you will be losing a lot of profits, but if it fails, you won’t have as much financial commitment to worry about.
- Loan: Another option is filing for a loan from a bank. Like seller financing, you will have to pay interest on whatever money is borrowed, however, it will give you a good financial foundation to get started with your business.
No matter how you finance your transaction, you should still do your research to determine which one will work best for you. Setting a financial plan in place is one of the most difficult parts of any large transaction, so don’t stress if it takes longer than expected.
Find a business broker
In order to find a business to buy, you should contact a business broker’s website and find their listings page to view businesses that are currently for sale. This is the simplest way to start your search because everything will be laid out for you already like the listing price, status, and revenue. This is much easier than searching the web endlessly and contacting sellers to find out more information about their company.
If you are looking to buy a business in North Carolina, don’t hesitate to contact ENLIGN business brokers today. We don’t accept businesses that don’t meet our requirements like companies who can’t substantiate financials, have negative cash flow, and business owners with unrealistic views of their business. You can view our listings page to learn more about the companies we are offering.