As a current business owner, you might feel your plate is already full in terms of work that needs to be done. However, what if an opportunity to purchase another existing business comes up that is too good to pass up? In that case, it’s something you would seriously explore.
After all, there are various reasons to purchase another business – you might decide to absorb it into your current operations or keep it running as a separate entity. They have an established customer base, structure, and resources that you can start benefitting from straight away. As you know, that makes it easier to start generating a return on investment compared to starting from scratch.
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How to Buy an Existing Business (5 Steps)
At least, that’s the case if you buy an existing business the right way. This starter guide will cover the main points to make that a reality.
1. Find the right opportunity
It’s an obvious step, but it is the most important one. You have to ensure you select the right existing business. By “right”, the company needs to be profitable with long-term viability, yes, but it also has to be within an industry of interest to you. Of course, it makes sense if it matches up with your current business.
Do you already have an existing business lined up? Before you pull the trigger, do your research. Make sure to check the figures, perform an initial viewing, and gain advice from a professional. If everything appears positive, you can push forward with the potential purchase.
2. Value the business
If a business is on the market, this will likely come with a price tag. However, that doesn’t mean the price accurately reflects what is up for sale. A lot of sellers, after all, can easily overvalue their companies – the last thing you want to do is overpay.
There are two main options when valuing a business: hiring a professional or doing it alone. A professional will be able to supply you with an accurate assessment, but they can be expensive. Going it alone will save that money, but you also need to be objective and confident in your ability to value everything correctly.
3. Negotiate a price
The seller has a figure in mind. You have a different one. To bridge the gap, you will have to negotiate. Understandably, the closer the two valuations are, the easier it will be to settle on an acceptable figure for both sides. Otherwise, be prepared for plenty of back and forth before any agreement is secured.
4. Get the necessary financing
Once you know the price, it’s about financing the purchase. It is unlikely all the money you need is currently sitting in your business bank account. This is when business acquisition finance becomes an important solution. Get a quote from financial brokers to get the best deal available from lenders. Learn everything you can about this funding in this detailed business acquisition finance guide created by expert brokers who know the industry inside out.
With financing for business acquisition, you are able to cover the purchase price. Even if you have a significant portion of capital saved up, it is likely this needs to be supported with additional funds. The right financial provider will ensure there are no delays in getting the necessary money – and you don’t miss out on the business purchase.
5. Pursue the business
When you have the finances at the ready, now is the time to approach the seller. It can be helpful to have some lawyers on side that can look through any contracts before you sign them.
Conclusion
Taking over an existing business can be a viable and rewarding option for entrepreneurs looking to begin their entrepreneurial journey. However, it requires careful planning, thorough due diligence and strategic decision making. From identifying the right opportunity to a detailed analysis of the company’s finances and operations, hopefully the comprehensive guide above has provided valuable insights and actionable steps to successfully navigate the process.
