Whether you’re leaping into entrepreneurship for the very first time, or a seasoned business owner, preparing to buy a business requires a great deal of effort. Fortunately, you don’t need to go it alone. An experienced business broker, working collaboratively with you, your financial advisor, accountant, and an attorney will prove to be an invaluable asset. But what precise steps do you need to take to buy a business, and in what order? Here is a step-by-step guide outlining how to buy a business in today’s market.
How To Buy a Business: Steps to Take
Irrespective of the type of business you wish to buy, you’ll want to follow the same “How to Buy a Business” protocol. The steps in this process include.
The first step begins a comprehensive fact-finding mission, to uncover, among other things, the type of business you want to buy. Note, this will not be a one-time endeavor. You will be conducting research throughout your search for a business. It is smart to partner with a business broker during this stage, as they can guide you through the entire learning process of how to buy a business.
Depending on your needs, a broker can also identify businesses that meet your criteria that are currently for sale. Look for a reputable business broker with top reviews, credentials from respected institutions and organizations, and a proven track record of success. The facts you’ll be seeking about a potential business during this step include:
- Down payment requirements
- Sale price
- Terms of purchase
- Income generated
- Cash flow
You should never buy a business without visiting its brick-and-mortar location. You’ll want to see what the business looks like and how accessible the business is to pedestrian and vehicular traffic. You’ll want to take note of the condition of the building, signage, grounds, and parking. Inside, you’ll want to see for yourself the condition of the space, including the equipment, tools, décor, etc.
More Fact Finding
Armed with knowledge about the initial investment requirement (down payment), and having visited the business, it’s time for you and your broker to get more information. This time you’ll want to learn answers to the following questions.
- What is the rent?
- How long is the lease?
- Who owns the property the business occupies?
- What have the sales been for the past several years?
- Can the seller support the sales figures with their accounting?
Making the Offer
If you’ve partnered with a business broker, they will help you to craft your offer. Your offer will include the purchase price and terms you’re offering. If you’re new to the industry, you may wish to include a term that requires the seller to help with the transition for 30 days and continue to offer guidance via phone/email for up to 60 days. After all, according to the Small Business Administration, the benefit of buying an existing business is that you’ll have greater control, than if you buy a franchise. However, you’ll have less guidance than if you buy a franchise, so including a stipulation that the current owner remains involved for a short while just makes good sense.
Note, it may seem counterintuitive, but you’ll make the offer before doing a deep dive into the business’s records. After all, there is no sense in wasting a lot of time confirming sales, leases, debts, etc., if the seller won’t accept your price or terms.
Once you and the seller have agreed to the price and terms, you’ll enter due diligence, whereby you’ll confirm that all figures match what the seller told you. Once you’ve confirmed all facts and figures, you’ll be ready to sign on the proverbial line.
Get Help Finding Businesses to Buy in Western Oregon
It is one thing to read an article that explains how to buy a business. It’s quite another to experience it firsthand. To make your business purchase a success, partner with a top-reviewed Oregon business broker, who will look out for your best interests throughout the purchase process. Patrick Bice, Founder of Northwest Business Sales & Appraisals is a top business broker serving Lane County and beyond. To schedule a consultation with Patrick, call 541-968-2728 or send us a message.