If you want to avoid creating business ideas and a lengthy launch process, buying an existing business is an alternative to starting your own. There’s typically less risk involved because you can buy a business with a successful track record, but this also means you usually spend more buying a business than you would starting your own. When you’re ready to take the plunge, there are four steps to the purchasing process.
While you can find listings for businesses to buy in many publications, magazines, and websites, two of the most useful places to look are BizON and SuccessionMatching. BizON has business listings in Ontario and allows you to join for free. SuccessionMatching has business listings from all across Canada, but there’s a membership fee that varies depending on the length of membership you choose.
Determining the Type of Business to Buy
Next, you need to figure out what type of business is right for you so you can narrow down your options. Consider your areas of expertise and your passions in life to come up with ideas. If you love fitness, try looking for gyms. Extensive knowledge of technology may mean an electronics store is right for you. SuccessionMatching uses an algorithm to match you with potential businesses based on information you enter about yourself, so it’s essentially the OkCupid of the business sales world.
Evaluating the Business
Once you have a business in mind, it’s time for the hard part research. It can make the difference between a smart purchase and wasting tens of thousands of dollars. Get in touch with the owner of the business and ask questions about why he’s selling it and how much assistance he plans to provide during the transition. Is he going to help you maintain relationships with any suppliers he currently uses? Request the business’s financial statements, including tax returns and profit and loss statements, for the last three to five years. You need to know how profitable the business has been and how much its current operating costs are. Never purchase a business unless either you or your accountant have gone over its financial statements.
Making the Purchase
If you think you have what it takes to make a profit running the business, start negotiating with the seller on a price. Know how much you can spend before negotiations, and stick to that limit. Once you’ve agreed on a price, you’re probably going to need funding, unless you have enough money saved up to buy the business outright. Otherwise, you can apply for a business loan or use seller financing, where you make monthly payments to the seller.Because of how expensive it is to buy an existing business, it’s good to be patient during your search. When you go through the right process and take your time, you’re more likely to find the right business to buy.