Small businesses make up a large portion of the entrepreneurial community these days and it’s easy to see why: when you own and run a small business, you can set your own pace, you can work with products and concepts that actually excite you, and you have much more independence overall (and responsibility).
However, starting a small business from scratch can be more than a little daunting and may be something that you don’t want to tangle with – though you still want to own a small business.
Thankfully, there’s a simple solution: buy an established small business from an entrepreneur! In this blog post, we’ll look at six helpful tips that will teach you how to buy a small business:
1. Know exactly what you’re looking for
With the large amount of people putting together their own start-ups, small businesses are springing up almost everywhere and the different types of businesses can be dizzying. Even if you have a good idea of what industry you’d most like to be a part of – whether selling vintage clothes or plumbing – you’ll have to do a lot more narrowing down.
Research exactly what types of businesses you’d be interested in purchasing and then find ones that are for sale. This can be a time-consuming process but it’s vital to buy exactly the right small business for you.
2. Make sure you ask all the right questions
If you want to learn how to buy a small business, make sure you know what questions to ask. When the owner of a small business expresses interest in selling out to you, you need to do some research before signing any contracts. Even if the business really appeals to you, it looks great, and the price is good…take your time. A case of buyer’s remorse in this situation can cripple your career for months or years.
And don’t just take the owner’s word that things are doing great; speak with as many people connected to the business as possible. Find out if the business is in financial trouble or if demand for its products/services has died down. If you find nothing nefarious, great! But if you do, you’ll be glad that you took your time and vetted the business.
3. Get the inside story on a potential small business purchase
There’s nothing like actually hanging out for a few days at a small business to see what really goes down inside. If you have the time, try to wrangle a week or two of simply observing the inner workings of the business you’re interested in buying.
Being able to get up close and personal with a prospective purchase is a great way to test the waters, spot potential headaches, and figure out if the business is actually for you.
4. Have confidence in the final sale documents
Having a good acquisitions lawyer as a small business changes hands can make all the difference. Absolutely everything about your agreement with the previous owner needs to be written out clearly and in detail for the final sale documents, contracts, lease, etc.
A business lawyer will be required for this step to make sure that everything is done to the letter of the law – and that the documents are drawn up in the appropriate legal language. Depending on the situation, you may have to have separate contracts drafted if the previous owner plans to remain at the business as an employee – or to make sure that he/she doesn’t immediately start a new business to compete with yours.
Whatever the case, the best way on how to buy a small business is to get everything in writing. Don’t stop asking questions and tweaking documents until you’re one hundred percent satisfied.
5. Consider buying a small business that’s losing ground
It’s sad but true: most small businesses fail within the first year or two of their start-up. That might sound heartless, since most small businesses are the brainchild of their owners, an expression of their passion for a certain industry or product. B
ut with so many businesses out there, smaller, lesser known ones often fall by the wayside. You can do something about that though – at least for one small business. If there’s a business you admire or want to be a part of (even as you’ve seen it start to fail), talk with the owner and find out if you can negotiate a sale.
And once you own that small business, it’s time to roll up your sleeves and dive in. With some hard work and ingenuity, you can turn a failing, foundering company into a vibrant entrepreneurial success.
6. Research purchasing additional acquisitions
What if you’re already the proud owner of a great small business and you’d like to expand your reach? Well, nobody says you have to stay in one industry or one line of work – broadening your area of influence in your community is a great idea.
Purchasing more than one small business says that you are confident in your entrepreneurial plans and that you’re not planning to go anywhere anytime soon. Depending on your situation, it might be a good idea to buy businesses that compliment the one(s) you already own (but it’s not absolutely necessary). Let the additional small businesses you buy help you reach new heights of success.