Buying a Business

A Brief Guide to Buying a Business

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Want to instantly boost your progress as an entrepreneur? Try buying a business.

Buying a business gives you instant access to profit and credibility. The key is buying the right business at the right price.

Take a look at this guide to buying a small business in just about any field.

Buying a Business vs Franchising

Buying a business is much different than opening a franchise. A franchise is controlled by a corporate brand that sets the parameters on how you have to operate. 

With a franchise, you get perks like advertising support and instant credibility. You’re piggybacking on the reputation of an established corporation to bring in new customers.

Of course, this depends on the brand you choose. There are lesser-known franchises that you’ll need to work hard to market.

For example, not all residential and commercial cleaning services are known nationwide. You might have to put in the work to bring brand awareness to your area.

But with most franchises, there is a corporate website that supports your online credibility. This is a major leg up compared to a small business that’s only known locally.

It’s much easier to open multiple franchises than open multiple small businesses on your own.

Should I Buy an Existing Business?

Buying a business means taking on a brand’s local customer base and reputation.  You’re solely responsible for everything that happens with the clients you choose.

Some entrepreneurs aren’t looking to reinvent the wheel when it comes to owning a business. They want a tried and true product that allows them the opportunity for growth.

Franchises offer this chance, but with many restrictions. You don’t control the brand or product so you can’t really decide how much you’ll profit in the long run.

The corporate offices could decide to roll out a product that customers hate leaving you to deal with the backlash. If you’re looking to run a company based on your own goals and values, consider buying a business.

Buying a business in your industry helps you get a headstart. 

Loan to Buy a Business

The most intimidating aspect of buying a business is financing. If a small business is worth millions of dollars, does this mean you need to come to the closing table with a check for the full amount?

Are there financing options available for people who can’t pay the full cost of a business outright? The answer is yes and no.

There is always financing available for people with strong financial profiles. The irony of business loans is that they’re typically reserved for people who’ve already demonstrated some success in business.

There are a few loans you can pursue if you use your personal collateral to secure the loan. This means that high net worth individuals can use assets like homes, cars, investments, etc. to secure a new business debt.

But this is the riskier way to borrow. Entrepreneurs looking to buy a new business need to pursue financing that’s not tied to their personal profile.

It prevents the risk of losing your home or other important assets in the event you’re ever sued or encounter financial loss. There are multiple methods of financing an existing business.

The first is using a traditional lender like a bank to secure funds. These funds come in the form of a business loan that’s repaid over a fixed period of time.

Even business owners that obtain loans through the SBA, or Small Business Association, have to use conventional lenders to apply for federal business funding. These loans are managed by the SBA after you’ve gone through the approval process with a bank.

You’ll receive an interest rate and monthly payment schedule once your loan is approved. The other method of buying a business is through owner financing.

This method is less common, but it’s a viable solution when you’re short on both cash and credit to buy a business. Having a strong business reputation is helpful in negotiating this option with the seller.

There are many reasons a seller might agree to finance the sale of the business. He or she might enjoy the idea of making an additional profit on the sale by adding additional fees to finance the transaction.

Consult with your business broker on potential deals where owners are open to financing. 

How to Buy a Business

The first step to buying a business is narrowing down your niche. There are businesses available for a few thousand dollars all the way into the millions.

It’s important to get an idea of what makes sense for your budget and experience by consulting with a business broker. A business broker can help you tailor your goals and connect with the right sellers.

Keep in mind that not all business brokers are created equal. There are niches among brokers.

For example, you’d consult with a technology business broker if you’re looking to buy a business in the IT sector. The next step in buying a business is to decide where you want your business to operate.

Are you looking for something nearby? Would you prefer a business in a certain market based on industry trends?

There are many factors to consider that will affect your lifestyle. If you’re not interested in a time consuming business opportunity, look for passive opportunities that won’t require your daily involvement. 

Time commitment is one of the most important things to consider after budget. 

Why Buy Businesses? 

Buying a business is one of the first steps to owning your financial future. A business is one of the few investment opportunities with infinite growth potential.

There are few limits to how large your company can grow. Make sure you find the right team of experts to help you narrow down your search and uncover the right industry for you.

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