If you have money in the bank and are looking to move out of the corporate grind to become a small business owner, you don’t always need to start from scratch. There are some business owners who might be willing to sell their business to you at the right price. These are mostly people looking to retire. There are times you might encounter a seller that’s looking to move on to new avenues.
Regardless of the reason, if you have the cash, buying an established business can be a good idea. But exercise caution. You don’t want to take up a sinking ship because the work involved would be enormous. Unless you’re really passionate about the failing business, it’s best to stay clear of such establishments.
So how do you recognize good businesses?
#1 – Problems
Before purchasing a new business, you need to have a frank discussion with the owner about potential problems. If the owner is open about the problems that the business might be facing, there’s an element of trust established right at the beginning. There might be some problems the owner might still be hesitant to confess.
You need to see if there are any financial liabilities, troublesome relationships with clients or suppliers, problems with staff or vendors. You should evaluate the business thoroughly for any red flags even before you look into how profitable the business might be.
#2 – See if it is established
Is it an already well-established business or is there still work to be done? Look into the business; see if it has an already established client base and a marketing campaign in place. Check to see if it has its own website and a social media and online marketing strategy at work too.
If you’re buying an old, well-established business, you might see cash-flow from the very beginning but you might also have to modernize it a bit. Always see what kind of expense you might have to incur after purchasing the business and weight up the cost and benefits.
#3 – Reputation
What kind of reputation does the business have? Is it a well-respected name? Or would you have to rebrand in order to bring it up to par?
If the business has a history of providing bad service or products, you might want to consider whether you’re willing to shoulder the responsibility of repairing its reputation. When you’re buying an old business, you’re not only buying the business, but also its established clientele and the associated goodwill. In fact, that’s what you’re paying most of your money for.
#4 – Employees
Another important aspect to examine thoroughly is the employee situation. You’re essentially inheriting them from the previous owner. Get frank evaluations done on all employees; interview them personally to see if they fit into your business agenda. Most importantly, you want to see if you might get along with them.
While buying an old and established business does have its advantages, it’s not a step to be taken lightly so consider your decision and options carefully.