Because so many businesses fail, it can be a wise move to buy an existing company that has an established presence instead of starting one from scratch. However, it takes more than just having money to buy a business and enjoy its success.
As you consider different sellers, make sure you have three things first. They will help you make the best purchasing decision.
1. Experience in the industry
Although much of running a business is the same regardless of the industry, general knowledge is not enough to keep you afloat. You also need to have experience in the specific industry. That background will make the following easier:
- Know about and comply with industry standards
- Ensure methods are efficient and correct
- Offer quality products and services
- Hire employees with the right skills
- Get ahead of competitors
Of course, you can always choose to expand your education and experience, but do that first another way.
2. Passion for the business
Having experience is useful, but if you hated working in the industry, then you should probably get out of it. No matter how enticing an available business may seem, it will not be profitable to you if you do not have a passion for it. Of course, work is not always fun, but when your heart is truly in something, it is likelier to do well, and it is easier to get through challenges.
3. A full picture
More than anything, you need to have a complete picture of the company you want to buy. Be thorough in your research and questioning. Look at record-keeping practices, debt amount, litigation history and employee turnover. Make sure you understand who the target market is and how to retain current customers.
Find out if the owner has a strong succession plan in place and has prepared the staff for the ownership change. Determine if the culture and values fit with yours. Read the contract thoroughly. Get to know the business really well so you do not face any unpleasant surprises after signing.