Business & Networking

How do you buy an existing business?

Thinking of Buying a Business?

It won’t matter if the asking price is $1 thousand or $1 million, you’ll have to do some serious homework before deciding if it’s right for you. Here are some key points to consider before getting out your wallet.

Comparable Prices

Each business type is evaluated based on different factors. Cashflow, profits and growth potential are just a few. Consider how you would look at a local restaurant compared to evaluating a website or local pawn shop. They would all have similar, yet different factors to consider. How much traffic do they get? Are they in a good location? What keywords do they target with their advertising?

One way to figure all this out is to see what other similar types of companies are selling for right now. See what factors determine their value and compare them to the business you are considering buying.

Tax Returns

How much did the current business owners report on their tax returns? How much did they owe on the business? Don’t pay more than they reported. Don’t base your buying descisions on what the owner say, but on what was actually reported.

It’s dangerous and scary to pay for a business only based on someone’s word. As a rule of thumb, only pay for revenue that can be proven, like IRS statements or audited financial statements only.

Track Traffic and Sales Yourself

Alright, sit in the business and pay attention. Watch, count, track customers coming into the business for a day. Is it really as much as the owner says? Compare it to the average being reported.

Buying a website? Ask to have your own tracking widget installed for a week so you can see what kind of traffic is coming in, and where it is coming from.

In other words, no matter what kind of business you’re considering, check the stats for yourself. The only exception is if they have audited statements from a Big Five accounting firm. If they do, the accounting can probably be trusted. (And if there’s a mistake, you’ll have the recourse of suing the accounting firm.)

 Any Undisclosed Problems

I’m not trying to make business owners sound dishonest. However, they may not want to tell you all the drawbacks, or they may not even consider them a drawback because they’ve dealt with them so long it just feels like part of the every day routine.

So, it’s really your job to dig in and find out what kind of negative crap is out there about this business, because you’ll have to build up or around or on that negative feedback. Do a Google search with their name, plus words like “lawsuit” “sued” “complaint” “BBB” “scam” “review” and so on.

Are there just general complaints about the business? Was there good reason for it, or are these the type of customers who like to “complain” for sympathy?

Can you also see what the future looks like for this company? Maybe future repair costs for equipment, or traffic generation for a website?

Financing

Have you fully understood how the current owners want to be paid? Are they willing to help finance for a period of time? Are they willing to help train you in their current process? Many sellers are willing to help you continue their legacy or help you build a success one of your own. Just ask.

There are many more factors to consider before you whip out the credit cards or checkbook to pay for this new business. Take your time. Don’t feel rushed, and if you do, then let this one pass. Rushing in, or feeling rushed, spells disaster.

If you are considering a new business purchase, download our new Business Evaluation Worksheet for free!

Mompreneurs; 4 low cost business opportunities for moms

You want to start a business, but don’t have more than $300 in cash? It can be done, and can even be done so you make a profit quickly. You actually have several options depending on your current skill set, how much time you have, and how much you want to make some money.

• This list of low-cost small business opportunities, can help you get started for less than $300.

Pumpkin Pasta Recipe

Sell what you know to Mompreneurs who need it

Mom’s stick together. The support system created by a mom network can be invaluable and often coveted. So, when considering businesses to start, why not help moms and make money while you do it?