Buying a business can be a highly profitable way to jump into the world of entrepreneurship.
When you buy a business, your start-up costs are non-existent, your team is already assembled, your business has existing customers and vendor relationships, and processes are already in place. In other words, you have a huge head start towards success.
Purchasing an existing business, however, does not guarantee success. First, you need to do your research to determine if the business is worth pursuing.
Approach a business purchase the way you would any other investment.
Investing in a business requires the same approach you’d take before making any investment. It should also provide the same outcome – a significant return over time.
A business can return high profits, but it’s also a riskier way to invest your savings. To mitigate your risk, study the past performance and current condition of the business. You’ll also want to consult with professionals in the same industry and those who are familiar with the business to help evaluate its prospects for the future. Do your due diligence and learn as much as possible about the business so you can make an intelligent and informed decision.
There are key questions to ask the current owner to help you uncover the true value of a business before you buy.
Gather as much data on the business as you can before you decide to purchase. The best way to do this is to sit down with the current owner and ask these four critical questions:
1. Why is the owner selling the business?
2. What are the financials?
3. What is the business' reputation?
4. Does the purchase include everything to run the business?
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Steve Niehaus, MBA, CBI