How to Buy an Existing Business for a Beginner

Even though many people that think of getting into business for themselves only consider building one from the ground up, you can also buy an existing business to get started. If you have never been in business for yourself, the prospect of buying an existing business can seem intimidating. There are a number of factors that you need to keep in mind throughout the process.

Benefits

• Buying an existing business from a business owner can provide you with a number of benefits. One of the big benefits is that you already have a customer base in place. Starting a business from scratch can be difficult because you have to attract new customers. With an existing business, you also can obtain employees that are already familiar with how your business runs. The systems are already in place, and you can simply take over.

Research

• When you consider purchasing an existing business, it is important to do a thorough amount of research first. You need to look at every detail of the business and make sure that it is really as profitable as the business owner claims. Look at how the business runs and how successful it truly is. Look at the competitors in your market and determine if you would be in a good situation with this business.

Professional Help

• As a beginner, it may be wise to enlist some professional help for this process. You could potentially hire a business broker to represent you during this transaction. Business brokers are much like real estate agents for selling and buying businesses. They can help you do your research and find out if the business is right for you. You also need to consider hiring an attorney to review the terms of the contract and other legal factors.

Value

• Determining how much to pay for a business can be very difficult. There are many different ways to value a business and you do not want to overpay for the business you buy. If you are using professional help, they can help you determine the value of the business. You will have to account for the property, the inventory, the customer base and sweat equity. Some business owners overvalue all of this while others can be very reasonable because they simply want to get out.

Financing

• Most entrepreneurs need to acquire some type of financing in order to purchase an existing business. Existing businesses generally require a large initial investment to buy. There are many commercial banks and venture capital firms that may be willing to lend you the money you need. You may want to try a lender that works with the Small Business Administration. This is a government program that backs commercial loans. With this program, it is easier to get approved than if you were to try to obtain a traditional loan.