Owning a business is almost everyone’s dream. It allows you to be your own boss. When it comes to owning a business, you can decide to start your business from scratch or buy an existing business. But it depends on your preference and personal decision. However, buying an existing business is more beneficial compared to starting your business from scratch. That’s because it is quicker and easier.
There are numerous benefits of buying a business. They include:
- The business name is already established and recognized
- There is an already established customer base as well as a proven market
- Any issue to do with zoning and permitting have already been addressed
- It is pretty easier for you to get financing if you are buying an existing business.
With that said, let’s take a look at some of the essential things you need to know about buying an existing business in 2022.
1. Weigh the pros and cons of buying an existing business
For you to make the right decision and determine if buying an existing business is the right thing for you, you need to weigh its pros and cons. As with everything else, buying an existing business also has its cons, such as using a lot of money during the initial stages. Again, if you want to see your business grow from scratch, buying an existing business may not be the right choice for you. But all in all, the pros of buying an existing business still outweigh the cons.
2. Decide on the kind of business you want to buy
There are so many types of businesses you can venture into. However, the rule of the thumb is to look for a business that fits your skills, lifestyle, and you are passionate about. To pick the right business for you, you need to consider your abilities, capital, expectations [in terms of earning]], commitment, and strengths.
3. Determine how successful the business is
Of course, you wouldn’t want to waste your hard-earned cash on a business that is likely to fail. That’s why you need to know how successful the business is. To do that, you need to do thorough research on the business you intend to buy. You should have a full picture of the business’s past success as well as its income potential.
You should also know the reason why the owner is selling the business. Also, ask around and talk to employees or suppliers to learn what’s going on behind the scenes. These are things you shouldn’t overlook when you are buying an existing business.
4. See into it that the price is reasonable
It is no secret that you may find a business owner selling his or her business at a very unrealistic price. So it is upon you with the help of an accountant to help you determine the value of the business. You can do this through:
Market approach: you compare what similar businesses are selling for
Income approach: Use the business’s past and future income to determine its value
Asset approach: determine the value of the business’s assets.
5. Talk to an attorney
Before you buy an existing business, it is crucial to talk to an attorney, especially an experienced business acquisition attorney. Buying a business can be very challenging, so you need legal advice at all stages.