How to Buy an Existing Business


Buying an existing business presents many advantages. The risks are less, start-up time is eliminated, and you may benefit from having the same customers, the same suppliers, and the same sales volume as the previous owner. You may also benefit from the advice and experience of the owner regarding sound business practices. Buying an existing business will make it easier to establish credit with suppliers than if you start from scratch. In addition, you may be able to establish seller financ­ing, which is much easier than acquiring bank financing and may even include a lower interest rate.

There are, however, definite pitfalls to be aware of when buy­ing an existing business. First, it is rare today for someone to sell a successful business. In todays competitive business world, a successful company with a positive cash flow is very valuable, and people usually don’t sell successful businesses unless they are under duress or for a very high price.

Investigate carefully before you buy an existing business. A good rule is to look into at least 50 to 75 different businesses before making a decision. Obtain complete financial statements for at least two to three years. Talk to all the important people in the company. Visit the banks of the businesses you’re inter­ested in and obtain histories of their loans and payments. Ask also to see complete customer lists, and then talk with some current customers. Ask them about the company and how they would feel about doing business with you if you became the owner.

In nine out of every ten businesses you may consider buying, there will be some flaws that you will have to deal with. If some­one is selling a business, the sales profit may be more impor­tant than the business. If so, you have to find out why. WHAT DOES THIS MEAN?

To find businesses for sale, look in the classified section of your local newspaper to find hundreds of daily listings. Go to the li­brary and look in trade journals and other business publica­tions. Also, real estate brokers are often hired to sell businesses.

Filed Under: Uncategorized

Tags:

About the Author: Marie Mayle is a contributor to the MegaHowTo team, writer, and entrepreneur based in California USA. She holds a degree in Business Administration. She loves to write about business and finance issues and how to tackle them.

RSSComments (0)

Trackback URL

Comments are closed.