When you sense the urge of entrepreneurship, you may want to start a new business. But that is not your only option. There is the option to purchase an existing business. Just as in the startup of something new, the process of how to buy a business that already exists is both thrilling and complex. There are common mistakes to avoid and certain advice to heed in order to experience the most positive outcome.
Tip #1: Buy the right business for you.
Consider your interests, expertise, and priorities. Beyond the financial picture, do the business’s goals, products, and services align with your interests & strengths? Choosing a business that does not align with your personal values, interests, or expertise is a recipe for frustration and regret. On the other hand, buying a business in an industry that excites you or a market you care about can offer the freedom and pride of ownership any entrepreneur desires.
Tip #2: Know the value of the business.
When buying a business, a detailed financial analysis of the business is required in order to determine the appropriate price. This sort of analysis includes reviewing cash flow statements, balance sheets, key assets, and more. Many serious sellers will have a formal appraisal or valuation document from a professional analyst. (For a more thorough description of the valuation process, visit our Business Valuation page.)
Tip #3: Conduct thorough due diligence.
Thorough investigation and follow up are crucial parts of how to buy a business. A business that appears to be thriving may have underlying issues you will only discover through due diligence. Be sure you know exactly what is leased, borrowed, owned, and owed before moving forward.
Tip #4: Remain sensitive to company culture.
The existing company culture is a crucial consideration when buying a business. Not only in terms of its alignment with your own sensibilities, but also in terms of your willingness to avoid abrupt disruptions to what is familiar to employees and customers. Maintain a healthy sensitivity to the beliefs and behaviors that have governed company interactions thus far and take care when making changes.
Tip #5: Consult a professional business broker or advisor.
The buying process can be confusing, especially if you have never purchased a business before. As a first-time business buyer, simply put, you do not know what you do not know about how to buy a business. One of the very best things a first-time buyer can do is involve a professional business broker. Viking Mergers & Acquisitions can help you navigate the process of buying a business. We are there for our clients every step of the way, and we specialize in selling businesses that are solid investments.
Interested in buying a business? Contact us today.
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- 4 Things to Consider When Looking to Acquire a Business
- 5 Mistakes to Avoid When Buying a Business