How to Buy an Existing Business. Although it may not be the purest form of entrepreneurship, buying an existing business does have its merits. An existing business tends to be less risky than starting one from scratch because many of its systems are already in place.
Things You'll Need
- Attorney Referral Services
- Business Broker
- Business Licenses
- Business Loans
- Business loans
Decide what type of business to buy. Examine your personality, skills and experience. Find one that suits you and one in which you have some background. When you buy an existing business, you will have to step right in as owner/operator, so you will need to have a good background going in.
Search for a business to buy. Ask friends and associates if they know of any businesses for sale. Ask your accountant, attorney and banker to help you in your search. Go to trade associations and the classified newspaper ads for leads
Analyze your prospects. Thoroughly investigate the business before deciding to purchase it. Find out its history - when it was founded and by whom. Look at its financials from the past five years. See whether it is profitable and whether profits are increasing or decreasing. Examine the business's operating expenses and compare them to those of similar businesses. Also, scrutinize the inventory, competition, supply sources, current personnel and reasons why the owner is selling.
Ask the owner for a look-see. Spend time at the business to get a good idea about its daily operations.
Decide on a purchase strategy. You can either purchase the balance sheet, which includes both assets and liabilities, or you can buy just the assets. It's a better deal to buy only the assets and allow the current owner to take care of any liabilities.
Set a price. There are several ways to value a business. The best method to estimate a purchase price is to look at the business's market value. An accountant should be able to determine this figure.
Negotiate a deal. Present your offer calmly. Don't be concerned about any initial reactions. Be prepared to address any objections. Have a fixed price in mind (which may be higher than the one in your written offer) and don't stray from it.