Buying a business is serious and should not be undertaken lightly. Everyone has different reasons for choosing business ownership,
whether it is because the business has been in the family for generations, you have been a highly valuable employee who is looking to take over, or you want the change in lifestyle that the opportunity may afford. It is important though that any potential opportunity you undertake match your personal interests, goals and capabilities.
Why Buy a Business
Why should you buy an existing business rather than start one from scratch? An existing business usually has a track record and should be able to generate income to begin offsetting the initial costs of investment from day one. Successful businesses tend to be those that have been stable and profitable for several years. The overall reduced risk of failure in acquiring a successful business is one of the most compelling factors in why you may choose to buy; however, other advantages include:
• Immediate cash flows from existing operations
• Retention of existing employee, customer and vendor bases
• Infrastructure (facilities, software and processes) that is already in place
• Availability of historic operating results for future forecasting
• Assets (tangible and intangible) that can be leveraged for financing the acquisition
• Flexibility in financing options (commercial lenders, seller financing, etc.)
Before purchasing a business, some key questions to ask yourself include:
• Why am I doing this, what is the long-term benefit (financial, lifestyle flexibility, a new challenge)?
• Do I understand the basic functions and skills needed to successfully run the business, and do I have those skills or access to people who do?
• Do I have the desire to grow the business and develop new revenue / clients / markets?
• Do I have the right experience?
• How strong are my management skills?
By asking these key questions and critically assessing your capabilities, you may discover that you need to further develop your skillset or identify the right individual(s) to hire or bring on as partner(s) to be successful in the endeavor.