A small business is a business that is owned and operated independently, with low sales volume, and with a small number of employees. Many people would agree that buying a small business is not as risky as starting one from scratch because it often saves you the stress of looking for a location, hiring new employees, and obtaining a regular client and customer base. There are also some disadvantages of buying an existing small business, such as the cost of purchasing it.
The first step to take when buying a new small business is to decide which business you plan to buy. It is a good idea to buy a business that matches your experience and interests, either professional or vocational, because it will be easier for you to operate, since you already have the required skills and experience. However, if you prefer a business that is outside of your area of experience and interest, it is a good idea to hire experts in that field or plan to keep the former employees when you buy the business.
The next step is to find the small business you wish to purchase. You can find several small businesses for sale in the daily newspapers and on the Internet. A business broker can also give you a hand, but will charge you a fee which will be a percentage of what the business is worth. A business broker can also make the search easier for you by taking care of the legal aspects of purchasing and starting a small business.
The third step is to understand how the business works. Even if the business is within your expertise, you still have to learn the specifics because no two businesses are alike, no matter how similar they may seem. You also have to learn how their customers are served and do a proper review of the financial statements, like the balance sheets, financial ratios, and the small businesses? income statements. Thoroughly reviewing these financial documents is very important because it will often determine if the business is a good buy or not.
Small business owners must also be aware of their competitors. You should be aware of their advantages so that you can get an edge over them.
The next thing to do is to find out the real value of the business. If you are working with an experienced business broker, they can take care of this. A business valuer will help you figure out the actual value of the business.
The local bank is often the best bet for obtaining the financing for your small business. They will ask you for collateral, which can be a form of a valuable real estate or the cash value of life insurance. However, most banks will be more interested in lending you money if you can prove to them that you have a good business plan, a source of repayment, and of course, a solid character.
The next step is to make an offer to the seller. Now that you understand how the business works, you know your competitors, their strength and weaknesses, and you know the actual value of the business and have a means to finance your purchase. It is time to make your offer to the seller. During the negotiation, don?t be pressured to exceed the price you want to pay. Always remember you can always pull out and walk away from the transaction.
The final step is to close the transaction. Once you have reached a mutual agreement with the seller, you?ll have to get a good lawyer to draw up an agreement contract to close the transaction.
Buying a small business can be a very good step to take, as long as you do your research well. No matter what kind of small business you intend buying, proper research and thorough investigation will go a long way to prevent future problems and loss.
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Source: http://www.installsoftware.com/how-to-buy-a-small-business/business_software
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