The process of buying a small business can seem intimidating, especially if you’re not sure where to start. However, a few key steps can make the process much easier.
Search online business listings, Craigslist ads and industry forums. You can also hire a business broker to get insight into different industries and company values.
Find Businesses Online
There are a number of online platforms that let you search for businesses up for sale, such as Flippa and Empire Flippers. These platforms help you find profitable SaaS companies, ecommerce brands, and other websites that are looking for new owners, and you can filter them by monetization style.
You can also check out local business fairs and expos to see what options are available. Many people choose to buy an established business rather than starting a company from scratch, because it can be more cost-effective and time-efficient. It’s also easier to secure financing for an established business.
Meet With the Owners
If you’ve found a business that has promise, it’s time to meet with the owners. When you express interest in buying their business, ask if they have an LOI (letter of intent) that you can sign to begin a process of due diligence. This will give you access to information such as projected financial statements and banking records.
You’ll also want to work with a banker, lawyer and accountant to get all the information you need. This will help you determine if the price tag is fair for the growth potential of the business. It will also help you figure out how to gather the funds you’ll need to buy the business.
Do Your Research
Once you have found a business that you are interested in purchasing, it is important to do your research. This involves finding out more about the company, such as its past successes, failures and challenges. It is also helpful to find out why the owners are selling it.
It’s also important to make sure that the business has all of the necessary legal documents to operate in your area. This includes having a valid business license, especially for highly regulated industries such as food services and childcare.
You will also want to find out if the business is violating any environmental laws or other local regulations.
Create a Plan
A business plan helps you determine whether buy a small business is the right move for you. The plan should align with your experience, skills and passions, as well as identify any potential barriers that could stand in the way of you being successful.
You should also consider whether you want to buy an existing business or start one from scratch. An existing business offers an immediate customer base, and you can focus on growing that market rather than trying to establish a new one from scratch. Plus, it’s often easier to get financing for an existing business.
Make the Offer
Once you’re confident with the information you have gathered and that the business is one you want to own, make your offer. This will shift the entire process into high gear, so be prepared to negotiate terms.
Your initial written offer will typically be called a “letter of intent.” It sets out your proposal and begins the discussion process that will ultimately result in a formal purchase agreement.
Your proposal will include the price you are willing to pay, a down payment, and any owner financing that may be required. It will also describe how you want to structure the purchase (asset or stock), transition and training, inventory, warranty provisions, non-compete agreements, and other key items.
