Buying an established business can be less risky and more profitable than starting your own business from scratch. In the process of buying the business you can agree that the previous owner will teach you the key business processes, or you can buy the business with the permanence of key employees.
The choice of your business is extremely important for the success of it. It is important to take into account these tips:
Define what your tastes and preferences are: There are businesses that, however lucrative they may be, you would not want to implement for various reasons. Prepare a list of possible businesses that may interest you, for your personality, family, tastes and preferences, time limitations, etc. This way you are limiting the search for options. Once this list is defined, it begins to document you in the key processes of those businesses, what characteristics make it successful, what is the profit margin that these businesses normally generate, among others.
Consider your knowledge and experiences: It is always advisable to start a business that knows the management, the "tricks" that can achieve the success of it. Take into account your work experience, profession and knowledge, so that you can implement them more efficiently. As the owner, it is recommended that you become the greatest asset of your business, the driving force of it.
Identify your work relationship with the business: Analyze if you will work in the business full time, part time, or if the business will be for you a limited time investment. Frequently, business owners can not dedicate the time they demand, and other people have to be trusted to develop and control it.
Define your investment capacity: Define what your capital limitations are, if you want to buy only the business without the commercial premises, or if you want to include the premises. When you buy a business, we must take into account that you usually need additional capital to develop it, perhaps make renovations, remodel, advertising expenses, etc. Do not run out of that additional capital needed for the business to grow. If you need financing, you should do an analysis of the return on investment. Take into account that businesses are usually medium or long-term investments, so you must obtain financing for similar terms. Short-term financing for investments that generate medium or long-term benefits can put you in a situation of illiquidity.
Take into account the cause of the sale of the business: There are several reasons why people sell their businesses. Many times the owners can not attend to them, they do not have enough capital to develop it, they do not have the knowledge to make them productive, because of changes, due to the death of a relative, illness, age, bankruptcy, etc. It is important that you know the cause of the sale, to see if you can compensate it with your skills, skills and capital. You may need help from professionals who analyze the financial statements, and give you their recommendations.
Do a SWOT (SWOT) analysis and define strategies for the business: Once you have selected a business as a real possibility of buying, study the Strengths, Opportunities, Weaknesses and Threats of the business, to define the strategies to follow that will take you to the success of it. You must study your competence. You must know what your current and potential customers are, know the degree of customer loyalty to the business. You must try to minimize your weaknesses and threats and take advantage of your strengths and opportunities.
Define the real value of the goods you will acquire: Frequently, when buying a business, include stocks, raw materials, products in process, furniture and equipment, machinery, land, buildings and improvements. Although this is not the whole business, it can have an important value. You must value those assets, as well as any liabilities (debt acquired) of the business. You must know the short-term and long-term debts, such as unpaid services, business bank loans, outstanding tax payments, labor liabilities, accounts payable to suppliers, issues of outstanding securities, and any other business debt . It is very convenient that you prepare a cash flow budget to know your financing needs.
Advise yourself on the sources of financing: Sometimes the seller of a business offers you payment facilities. It is important to take them into account.
There are also different sources of financing in the market, in commercial banking. Analyze them taking into account the return on your investment. These are some tips to take into account when buying a business. It is always important to take into account the specialists in buying and selling business. In business there is no "Love at first sight". Do not be passionate. Be careful, and accurate. Good luck!