Buying an Established Business
ADVANTAGES:
Currently operating and established, existing cash flow, financial continuity, possible owner financing, seller training for smooth transitionDISADVANTAGES:
Substantial investment, possible transfer risk, purchasing intangible as well as tangible assetsHere are some items you might want to check when considering the purchase of a business:
- How long has the business been established?
- How long has the present owner had the business?
- Why is the present owner selling?
- Do the books and records indicate a history of success?
- Is there enough monthly cash flow to make the monthly financing payments or debt service?
- And enough to pay a reasonable salary to you, the new owner-manager?
- And some left over to provide a fair return on assets and your cash investment?
- Does this business provide the lifestyle quality you seek?
- ? Are the business fixtures and equipment state of art and well maintained or are you going to have replacement expenses?
- How much competition is there in the local market and regional markets?
- Is the industry in which the business operates declining or growing?
- Does this business require special licenses or qualifications?
- Do you have experience managing people?
- If the property is leased, is the lease assumable? Are there options to renew?
- How difficult will it be to find qualified employees?
If the business is clearly successful and making good money, you can expect to pay a top price for it because it includes the intangible factor called 'goodwill'. If the business is a 'fixer upper', or has not yet achieved its potential, or is undercapitalized or poorly managed or needs additional exposure to the community, you might find a real bargain. For the energetic individual who thrives on a challenge, this is the best buy.
Reasons for buying a business | Starting your own business
Buying an established business | Buying a franchise
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