When someone thinks about going into business for themselves, there is usually an idea that they have to start out at the very bottom; put their idea forward, get some start up money, and then try to grow a customer base.
The whole process is enough to turn some potential small business owners off altogether, and keep them in their day jobs.
However, don’t let thinking about the process too much discourage you. If starting a business from the ground up isn’t for you, consider buying a small business. As long as you do your homework and know what to expect, you just might find that purchasing an existing small business may be a feasible and profitable idea.
Know the Pros and Cons
First of all, it is very important for you to understand both the positives and the negatives that can come with purchasing a small business which has already been around for awhile.
We touched on the most obvious benefit above: it is more than likely that the business already has some sort of customer base that you can work with. In addition, a company that has been around for a while will also have a track record that will enable you to see if you can expect success after a purchase.
And of course, you will hopefully be able to see an immediate return in the form of incoming cash when you buy a business rather than waiting, as you must do when you start at the ground level.
However, for all of these positives about buying a small business, there are accompanying risks. What if the customer base that the business had was actually quite dissatisfied with the services the business formerly provided?
Sure, you are a new owner, but they might not even know that or worse have transferred their loyalty to a competitor. The company might have outstanding debts and obligations that will transfer to you when you gain ownership. For example, you may inherit bitter employees.
Assess Before You Buy
There really is only one way to be comfortable with your decision to buy an already existing small business, and that is to do a thorough analysis of all the aspects of the business before you buy it.
Really, it is the same approach that you should take with anything in your life: be cautious and ask questions, and never rush into anything. Remember to cover everything in your assessment and get it all on paper; this includes sales trends over the years, any legal proceedings, employee actions, and so on.
Never be afraid to negotiate when it comes to buying a business. If you see that there are obvious problem areas with the business, then point them out to the current owner and offer less; make sure that he or she knows why!
Often businesses that are selling have a good idea of the real value, including the market, and will be willing to negotiate.
Remember that if you are going to buy an existing small business, your future success or failure will depend on the care you take at the purchase stage. Take your time, leave no rock unturned, and you will likely make a good decision.