Before you buy a business…
Here are some important things to consider.
Buying a Business
Would you like to own a business?
We can help you find the right fit for your interests, experiences, and finances. If you buy a business in Hampton Roads that is already operating, you can bypass the challenges of start-up and start receiving cash flow right away. There are many other reasons to buy an existing business.
Your resources are already in place. Although you are usually free to make changes, an existing business often has relationships and accounts with reliable suppliers in Hampton Roads. You can skip the trial and error and use the services that were already working well for the previous owner. You won’t have to establish credit from scratch, as your suppliers are already familiar with how well the business is producing.
Your employees and customers already have relationships. If you buy a business in Hampton Roads, you will probably have employees who know the business and its customers well. A solid customer base and a staff that knows and anticipates their needs is a perfect environment for a new business owner. If everyone loves Sarah and she continues to answer the phone or work the cash register, this can be a tremendous asset during the transition of ownership.
Permits and licenses are already established. When you buy a business that is already operating, you don’t have to worry about finding and getting approval on necessary permits and licenses for your industry. Many licenses can simply be transferred, and you can feel confident that most re-applications will be granted based on prior approval.
How to choose the right Business
If you want to enjoy the benefits listed above, you will have to be careful to choose the right business.
Research to ensure that it is a well-run, profitable operation. There is more to finding the right business than operational efficiency and cash flow. If the business is not well-suited to your needs, a smooth-running system can quickly fall apart.Your search should begin by asking questions to identify what types of businesses you would enjoy operating.
In what environment do you thrive? Do you prefer to work outdoors, perform calculations in an office, or whip up creative dishes in a kitchen? Most small businesses require long hours, so make sure you will be in an environment that is most natural for you.
How much contact with the public do you desire? All businesses require contact with customers, but some require a higher degree than others. If you prefer to work quietly and minimize interaction with people, a coffee shop or retail store should be crossed off of your list.
What skills and experience do you already possess? If you can find a business that is in a niche you are already familiar with, you will have the best chance of success. You don’t have to choose something that lines up with your current profession, but it should at least be an industry in which you are familiar with the terms and trends.
Evaluating a Business
Once you have narrowed the choices to businesses that are suitable for your interests and experience, it is time to evaluate the business itself. There are some specific aspects you should consider.
Why is the owner selling? The first thing you should find out is why the current owner wants to give up the business. It could be for retirement, relocation, or to pursue other interests. However, it could also be a decline in demand, an increase in competition, or the fact that most of the business’ equipment will need replaced in the next year. Make sure you know the full details before move forward.
How much working capital will you need? Some industries will require much more than the purchase price to get started. Ask how much capital is necessary for inventory, overhead, and insuring accounts receivable. Find out how long it takes customers to pay invoices and what payment terms their suppliers offer. These questions can offer insight into cash flow that you might not see by looking at a balance sheet.
Are there off-season times you will need to consider? Make sure that you know more than just total profit. Ask about seasonal cycles during the year and how much income you need to set aside in the most profitable months. Find out if there are times when you need to hire more help or lay off employees to meet payroll.
The many facets of evaluating a business for purchase can seem overwhelming, but they are not impossible. All Trades Global can offer the experience and support that you need for a successful purchase.
Contact Us to discuss your business interests.