Making the decision to buy an established business is a big deal.
You need to know exactly what you are getting yourself into so that you can ensure you are making the best choice for yourself and your family.
There are many advantages to buying an already established business. They have already done most of the hard work in the start-up phase for you. You will usually have customers that already know and use the products you will be selling, and hopefully, a good position and stock.
Buying A Pre-existing Business Vs Opening A New Business
First, you need to decide if buying a pre-existing business is the best move for you versus opening a new business. There is a lot to consider such as:
- Do you have the finances behind you to purchase the business, handle all the changeover process, operate while you get going on little income and be prepared for any unexpected costs?
- Do you have the skills and knowledge to take over an existing business? Should you be doing some extra learning or upskilling before purchase?
- How will it affect your family? Do you need babysitters, change of routines? Will you need to move house or change the kids’ school?
- Are you prepared to take on someone else’s project? Taking into consideration that staff will already be trained a certain way, customers will have certain expectations and you will be taking on any existing problems or contracts.
Finding A Business To Purchase
If you are confident that this is for you, then the next step is finding a business to purchase or perhaps you already have one in mind. Now is the time to do lots of research on your market, customers, competition, location, and current status of the business.
- What’s the economic market like right now in the industry you are considering?
- Is the product or service offered a need or want and will this affect profits in times of economic downturn?
- Are people in the industry making money right now?
- Who is your potential customer, what are they like, how do they live, what do they value, what appeals to them?
- How can you successfully market to these customers? Be a customer, get the experience from the business as it is now and consider what was it like, and how would you change it.
- Visit them if you can, be their customer and learn from the experience, what works, what doesn’t.
- Is the location good for the business or would somewhere else be better?
- How does your location affect your foot traffic, advertising, visibility, etc.
- Is the business doing well financially?
- If it is struggling, is there an obvious reason like lack of advertising, an owner who wants out, not well maintained, or something more serious?
There will be lots of other, industry specific things to think of and it is important to get good advice from the right people. If you have been in your industry a while, there is a good chance you have a few contacts already, utilise them as best you can. If not there are places that can help.
More Questions to Ask
- Why is the vendor selling the business in the first place?
- Do you have room to grow in the current location?
- Have you been given the financials? And if so, have you had your accountant look over them?
- What worked or didn’t work for the previous owner?
- Are you also buying the intellectual rights to the business?
- Does the business have any outstanding debts?
A lot of industries also have trade shows, conventions and the like also. Attend these and get talking. And lastly, don’t just buy anything. Thorough research is crucial before you jump into something huge like this. Don’t take any shortcuts.
Have you ever bought an established business? What is your best tip or advice for others considering the leap?