Purchasing an existing small business can be a great option if you want to start a business but don’t want to spend time on the initial phase of building a new business from the ground up. However, you need to do thorough research to help you make the right deal when buying a business. Here are 7 tips to help you find the right opportunity for you.

Is it the Right Type of Business for You?

Before spending a lot of time on research, establish what type of business would be a good fit for you. You need to ask yourself questions such as whether or not a certain business type is something you are actually interested in, how you would be involved in the operations of the business, how much of your time it would require to operate, and if it would require your physical presence. For example, a restaurant might require your physical presence, but an online business might not.

Areas to Investigate

Here are some of the key areas to investigate to determine how successful a business is:

● Solid customer base
● Good staff and vendors
● Increasing sales and positive cash flow
● Efficient systems and operations
● Inventory
● The demand for the products/services
● Sales records
● Legal documents
● Location

Asking Questions

Here are some of the questions to ask the seller of the business:

● What is the seller’s reason for wanting to sell the business?
● How long has the business been operating, how many owners has it had, and how long did each owner operate it?
● How are new customers gained and current customers retained?
● What are the future projections for the business?
● What are the roles of the staff, their skills, and experience working in the business?
● Over time, what changes have been made to the business in terms of what it offers and its customers, and what changes were planned for the future?

The Reputation of the Business

As part of your research, find out if the business has a good reputation. Talk to customers and vendors and look at online reviews of the business. You can also check sources such as the Better Business Bureau.

The Value of the Business

Here are some questions to consider regarding the value of the business:

● What is the asking price for the business and how was it arrived at? There are various methods for arriving at the asking price, so find out what method the seller used.
● What are the assets and liabilities of the business?
● Are there any lawsuits pending?
● Are invoices paid on time?

To gain an understanding of your possible annual profit or return on investment from the business, examine its financial records. Look for ways that you could make the business even more profitable.

Are you looking to buy or sell a business? A coach can guide you through the process. Get in touch today!