If you want to be an entrepreneur but struggle to create your own idea or would simply like some assistance in the form of a ready-made company, you can always buy a business. When you buy a business that already exists, you tend to invest more up front when it comes to money, but you also receive a ready-made business plan, as well as property and employees – depending on what you buy. If you choose to purchase a franchise, you will still need to hire your own workers and often find a place to establish the business.
If you’re unfamiliar with the world of business, attempting to buy one can be difficult. Business investing and franchise investing are great ways to ‘purchase’ a business with some assistance, since many franchises can be bought with the assistance of a management company. These management companies can help simplify and explain costs and the documentation necessary to complete a legal deal and transfer.
So, what do you need to do to buy a business?
Decide What You Want
The first step in buying a business will naturally be determining what kind of company you want. The majority of businesses out there are in the hospitality sector, usually restaurants, coffee shops, bed and breakfasts, and hotels. These seem simple at first glance but often require specialized skills and knowledge to run, especially because they can pose health hazards when mismanaged.
Make a detailed list of your own personal skill set and find out where you excel and where you need more training. What kind of company would work for you? Also think about the size and location of the business. Would you be more comfortable running a small family bakery or do you want a massive chain restaurant? These will impact your lifestyle and ability to make money in the long run.
Research What is Available
It’s important to decide what kind of business you want, but you also need to be realistic and look at what is available in your area. Are there any local companies whose owners are looking to sell? You shouldn’t just type “businesses for sale” into a search engine because this method won’t help you find the real gems. Instead, put out some feelers in the local community.
Do you know any company owners that feel stifled in their current position? How about managers looking to retire? If you genuinely can’t find something, then you can take to the internet. Choose a reputable site and investigate each opportunity with care. For every legitimate deal out there, there is at least a dozen scams.
Avoiding scams is one of the reasons why many choose franchise investing since a well-known brand will have more oversight in management.
Research Again and Hire a Professional
After you research what business to buy, you have more homework. Investigate the business carefully and see if there are any issues hiding under the surface. Does the property have environmental problems? Is there mold or mildew waiting to be a health issue? What is the management like? Is the business in severe debt? These are problems that you will be forced to take on if you’re not careful.
If this is your first time investing in business, it’s important to consider hiring a professional for help. There are companies like MBB Management that aid with the management and purchase of businesses, helping to explain and simplify the process. There are also many freelance consultants.
The goal in hiring aid is to have someone experienced on your side that can help with the next two steps: funding and drafting a contract.
Get Your Funding
When buying a business, you almost never hand over a big bag full of money. This is impractical and unrealistic, especially since most people don’t have tens of thousands of dollars laying around. Instead, you can utilize one of three options: seller financing, venture capital, or a business loan.
Seller financing is pretty simple. This is when you make an agreement with the original owner to make payments over a set period of time. The exact amount tends to include interest, but you can be flexible in the agreement about what to pay and when. Seller financing is often the best choice for everyone because it is simple, easy, and requires few third parties.
Venture capital is more difficult. This is when you partner with an investor who provides the funding while you do the work on the ground to ensure the business remains profitable. If you do make money from the company, you will often owe a lot of money to your ‘angel investor.’ However, if you fail, you don’t have a debt since it was your partner who is on the line.
Finally, there is the typical business loan. This is when you make an agreement with a traditional bank or online lender. They give you the money to buy the company outright, and you pay back the loan over a set period of time with interest. If you fail to make payments, the lender can take your business. However, this can improve your credit and open you up to more revenue!
Draft an Agreement
The final step to buying your own business will be drafting a legally binding agreement with the seller. You will want to hire a lawyer who specializes in business and property law, as they can help make sure you don’t get cheated during the creation of the contract. To become legally binding, you will also need to have the contract notarized. But once this step is finished, you are a business owner!
You don’t have to create your own company idea to become a successful entrepreneur and businessman or woman. Instead, you can invest in a preexisting company or franchise and then utilize your unique skills to become successful. However, you shouldn’t undergo this process alone. Don’t be afraid to seek out help from reliable industry professionals, lawyers, and an accountant or two to make sure you’re prepared for the future.