Taking Over an Existing Business

5 Things You Should Know About Selling Your Business
November 20, 2019
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Taking Over an Existing Business

If you think you have the chops to be an entrepreneur, but would rather not start with a new idea — or just plain don’t have a new idea worth starting — you may be a great candidate to buy an existing business instead.

While buying an existing business typically involves more upfront cost, it also presents less risk than starting from scratch. Financially, you’re looking at actual profit and loss records rather than rough estimates, and there’s a clear history of sales to point to. You may also acquire valuable patents or copyrights, or have the opportunity to drive a stagnant business in an exciting direction with your expertise.

Why founders sell businesses

It’s a common misconception — a cultural stigma, even — that if a founder decides to sell a business, there must be something wrong with it. Either it’s about to go under, or the financials are in bad shape, or the founders must know something you don’t, right?

In reality, founders sell their businesses for a myriad of reasons. They may be in a different life stage, and the needs of the business no longer match their lifestyle. Or maybe they’ve grown bored with the existing business model, or they’re excited about a new idea. The business they started may be a great one, just not one they are passionate about running day-to-day anymore.

But even when a founder is ready to move on, the decision to let go of something they built from the ground up isn’t an easy one. By finding the right buyer — someone with the passion to take the business to new heights and the strategic mind to make the business perform well into the future — a founder can move on comfortably, knowing the business they built is in good hands.

How to buy an existing business

Do you want to be the buyer that ushers an existing business into a new era of success? Follow these steps to move forward.

1. Decide what you’re looking for.

Purchasing a business is a huge decision that will impact your life and livelihood for many years. So before you even start investigating options, start by knowing exactly what kind of business you’re looking for. Here are a few factors to consider:

  • Location: Are you open to moving, or do you need something close to home? Or maybe you’re looking at businesses not tied to a specific location. Either way, remember that the location of your business will affect labor costs, taxes, and other financials that can change the business’s bottom line.
  • Size: Do you want to own a small family business, or a large, bustling enterprise? Buying a larger business could mean bigger profits, but will likely also involve a higher purchase price and more stress in the transition.
  • Industry: What are the areas where you already have experience? What causes are you passionate about, or what hobbies are you interested in?
  • Lifestyle: Are you interested in a job involving lots of travel? Are you open to working odd hours, or would you rather stick to a traditional nine-to-five? As the owner of a business, the buck stops with you — so think twice before choosing the kind of hands-on business that might involve emergency phone calls at 3 a.m.

2. Research available businesses.

Once you know what you’re looking for, you’ll need to start researching businesses up for sale. But wait! This isn’t the time to start Googling “businesses for sale.” Not yet, at least.

First put out some feelers close to home. Are your friends who launched a successful app ready to move on to their next project? Do you work for a small business you love whose owners may be willing to sell? Or if you’re keeping it small and local, maybe the owners of your favorite local coffee shop are ready to sell out and move to Bermuda?

If you know of a business you wish you owned, there’s no harm in asking.

From there, move outward to your business contacts, and carefully take to the internet for your research. BizBuySell is a reputable marketplace for buying businesses online. But be careful—for every legitimate opportunity to be found online, you’ll encounter dozens of bad deals waiting to happen.

3. Consider working with a business broker.

If you’ve done some research on your own and haven’t found the business you’re looking for, consider hiring a business broker to prescreen businesses for you, help you pinpoint your areas of interest, and negotiate the terms of your eventual business purchase.

Business brokers work similarly to real estate agents in that they will typically charge you a commission—around 5 to 10 percent of the purchase price—so they only get paid when you buy a business. So while the assistance of a broker can offer may be worth the cost, proceed with caution, and don’t let yourself get pushed into a hasty decision.

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