When you buy an existing business, you can save yourself a serious amount of time and money — your startup costs are all rolled into a massive bundle, and once the transaction is complete, you can hit the ground running. Still, buying a business is a commitment that doesn’t just change your career, but changes your whole life, and you need to know what you’re getting into before you start signing checks and making promises. As you prepare to buy your own business, take the details into consideration so you can live out your dream without getting tangled in red tape.
- What you want. Buying a business is like having children — it affects virtually every aspect of your life, so you have to be sure you’re ready for the commitment. Part of that certainty comes from choosing something that you know you can devote your life to. By deciding what type of business you want to buy and what you want your role to be — for example, you may be the hands-on type, or you may hire a full staff — you can be sure that you aren’t committing yourself to something for which you aren’t ready.
- How to negotiate. If you’ve ever bought a car or a home, you know the importance of budgeting and negotiating. If you have your eye on a business but aren’t sure of its real value, contact a business valuation consultant to help you out. Professionals in this field conduct appraisals on existing business, so you have a clear picture of what a business is worth — which could be substantially more or less than the asking price.
- Due diligence. When you buy a business, you buy everything that comes with it, so you best do your research ahead of time and know what you’re getting into. This type of research is called due diligence, and it’s standard practice for anyone making a major acquisition. You need to know everything about the business, from its neighborhood and its clientele to the zoning restrictions on the building and the taxes it pays each year.
- Where to go. If you buy a business without a plan, you’re setting yourself up for failure — after all, you wouldn’t set out on a road trip without planning your route first. Determine what your business plan is — what you want to invest, what you expect of your returns, and where you want to steer the business once you take the helm. With a business plan in place, you can set short-term and long-term goals for your new venture.
- The Challenges. Owning a small business is neither easy nor simple, so you have to know and understand the challenges you’ll face before diving in. You can’t predict everything, but you can expect to work long hours and shoulder responsibilities that affect your personal life. Talk to other small business owners — even the ones with which you’re negotiating the deal — so that you know and understand the commitment you’re making.
You take a great leap of faith when you buy a business, and you can never expect to know exactly what your future holds once you do. Doing your homework and being prepared, however, makes the difference between living your dream and living a nightmare.
Perry Sheraw is the founder and executive vice president of eBusiness Appraisals. She is a dedicated business owner advocate with a mission to ensure all business owners have access to critical information in order to make the right choices and achieve the highest possible value from their lifeâ€™s work.