How to Buy and Sell a Small Business

Owning and operating a small business is a big part of the American dream for many people. But buying and flipping a business can be even more profitable than running one! Sophisticated investors with good business management and negotiation skills can purchase businesses below their fair value, spend a few years growing the business, and then sell it for a tidy profit.

Instructions

1. Contact a business broker. Business brokers are professionals who help individuals buy and sell entire businesses. You'll be using the broker to locate undervalued businesses in industries that you have expertise in.

2. Make an offer on a business you want to flip. The broker will help you value the company and make an offer for the one you want. Don't forget that the seller is getting valuation and negotiation advice from her broker as well, so don't expect to offer half of the asking price and close the deal right away.

3. Close the deal. Before you ink a deal be sure you plan on how you're going to pay for it. Some investors pay cash, and others arrange for financing. If you're going to use financing be sure you secure it before getting too far along in the negotiations only to find out you can't get financed.

4. Add value. Now that you own your new corporation it's time to reduce costs and increase profits. Put your knowledge of the industry to work and start building value in your new enterprise.

5. Appraise the business. After a few years of higher cash flows and profits, have a business valuation done. Remember the final sale price will be negotiated, but you'll want to have added significant value before you put the enterprise up for sale on the auction block.

6. Sell the business. Work with your business broker to find the best-paying buyer. You may have another entrepreneur buy your enterprise or maybe a competitor will buy you out. If you've been very successful an IPO may even be an option; working with a good business broker at this stage is critical in determining your best exit strategy.

Tips & Warnings

• Business deals can be very risky, so be sure to consider all your options and all the circumstances before proceeding