Six Things You Should Do Before Buying Your Dream Business
Many people wish they were their own boss. Entrepreneurship offers that together with financial freedom, but only when done right. According to a Small Business Trends piece on Startup Statistics, only 56% of all businesses started in 2014 made it to the fifth year. The business world has many uncertainties. An entrepreneur has no full control over factors like economy, political instability, taxes, and clients. To avoid the challenges that come with starting a business from scratch, buy an already existing business.
Former First Sergeant Major at Israeli Defence Forces and serial entrepreneur, Moran Pober, has acquired many businesses in different niches, thus realizing the power of investing in already established businesses. Pober is the founder and CEO of Acquisitions.com, the hub for the greatest wealth transfer in history. He has worked with companies like WeKix.com and ABD Assets as an investment partner in the past. Also, he has done projects with iTips, Top 100 app in 100 different stores in countries like the US, Canada, and the UK and TalonX, the media company. Today Pober is focused on helping entrepreneurs buy their dream businesses.
So how does one go about acquiring a business?
What are You Looking For?
Before setting out to look for a business to buy, it is vital that you make some crucial decisions.
The Industry: As an entrepreneur, buying a business that is in line with the field in which you have experience is less risky. Choose a company in an industry in which you are passionate about.
Size: Are you interested in a small business or a big company. A big business will need more capital to acquire. It also means you could get many profits after the acquisition.
Location: The decision about the site will solely depend on how far you want your business from where you live. Where your business is will affect taxes, labor costs, and other financial aspects of the company.
Lifestyle: Different businesses demand different lifestyles; working hours, traveling, late-night calls, and others. Choose a company that goes with your lifestyle preferences..
Look for Available Businesses
Now that you have decided on the kind of business you want, it is time to search. It does make sense that you first look in companies that are close to you. Ask people you know that may be looking to sell their business and move on. Or go out to a shop you know and always wished to own and ask. The internet also has platforms like BizBuySell, where you can purchase businesses for sale online.
You Might Need a Business Broker
If the search for a business on sale does not end successfully, you will need a broker. Like a real estate agent, a business broker will help you find the company you want for a commission- around 5 to 10 percent of the buying price. They will help you prescreen businesses, point out your areas of interest, and negotiate the terms of your business purchase.
Take a Closer Look at the Business You Have Chosen
Before getting too excited about finding your dream business, do your homework. The enterprise might look perfect at first glance, but who knows what hides underneath. Get yourself an acquisition team to help you out at this point. If you don’t have a broker, you’ll have to find an acquisitions attorney and an independent business valuations firm to determine the value and state of the business. The valuations firm will also help determine how the current owner’s connections and expertise will affect the value of the company. Some clients may decide to leave after the acquisition, which will affect the value of the business.
Also, hire an accountant to evaluate the written financials of the business to make sure everything is okay and question anything that might be unclear. Remember, you are buying a business and all its issues. You can never be too careful.
Acquiring an already existing business means you will have to come up with much money. Unless you are very wealthy, you will have to seek financial backing to make the acquisition. Know the purchase price and find enough funds for that. Here are a few ideas on how to come up with enough capital:
Angel investors or venture capital: This is a financial investor who will join as a partner in purchasing the business and sharing the profits after the acquisition.
Seller financing: In this case, the seller of the business lets you pay in bits over a certain period with interest. It is arguably the best choice to finance the acquisition.
Business loan: Here, you take a loan from a bank or an online lender.
Draw the Sales Agreement
With everything including finances set, all that is left is drafting the agreement. Make sure you have an excellent acquisition attorney for that and that you understand the terms of the contract before signing anything.
Do not leave any stone unturned to prevent problems in closing or after closing the deal.
Becoming an entrepreneur doesn’t mean you have to start a business. Some say that the best way to learn entrepreneurship is to start an enterprise, well, why start from the ground when you can buy a running company and still learn the business?