What to look for when Buying a Business

There’s a lot of businesses on the market – buying one can be overwhelming. With careful consideration and strategic planning, you can make an informed decision that leads to long-term success. Here are some ideas on what to consider to help navigate making a purchase:

TYPE OF BUSINESS

There are many different types of business in the world – which ones interest you? Food & Hospitality, Fitness, Retail and Service are all examples of businesses that people use daily. Consider your personal interests, passions, and skills. Pursuing a business that aligns with your area of expertise will drive your innovation and promises a more successful venture, as opposed to buying into an industry you know nothing about. Additionally, choosing something you’re excited about can help you feel more satisfied.

COST ANALYSIS

Review the costs associated with running the business, and determine if it makes sense to purchase it. Consider fixed expenses, like rent, utilities, and insurance. These are important to consider as they will be constant and are a requirement for running the business. Operating costs are another large factor, for example cost of payroll, materials, equipment and maintenance required to facilitate the service you’re trying to sell. Look into tax forms and previous financial statements. Ensure that you’re aware of what you’re buying into, and that it’s a good investment to make. Compare this with your budget to make your decision.

ASSETS AND LIABILITIES

Review assets to the company, and potential liabilities. Assets can be physical or non-tangible. Property, Equipment, and raw materials are all physical assets whereas brand value and copyrights are non-tangible. Each add value to the business and make them more desirable for purchase. Other assets may aid the transition period after the business is purchased, like the transfer of employees or supplier contracts.

Liabilities can either be short-term or long term. These may be expenses that the business generates in day to day operations – It’s normal to have financial obligations, so long as they are managed properly and are kept as low as possible. Other liabilities to be aware of are loans or obligations/agreements the current owner may have in place – you will assume responsibility of this when the business is in your possession.

BUSINESS PLAN

The business you’re purchasing should come with a plan containing business history, marketing strategies, financial position, and a view for the future. If it’s currently a strong business, consider the option to run it as it exists now, and keep the original name. If it’s a failing business, there is room to create a new innovative plan and build a new business. You can determine your plan through assessing the items discussed earlier, like cost analysis, and assets/liabilities. Ask the seller why they want to sell the business – the owner could be trustworthy or not, this can be discovered through their reasoning. If they’re seeking other opportunities, or retiring, these are valid reasons to sell. If they are not open to discussing, this is a red flag.

Buying an existing business is a great way to become an entrepreneur, without starting from scratch. By carefully weighing some of the topics discussed, you can make a well-informed decision that aligns with your goals, and will lead to long-term success.

Contact Southbrook Business at 1 844 832 4999 today and find our how we can help you find success in the franchise business. At the moment, Southbrook Business represents several National Franchises looking to partner with qualified prospects to open multiple franchise units in Canada. We Buy. We Sell. We Grow Businesses and Franchises!