There are many questions you can ask yourself as you set out to buy a business.
Is this the right time to buy a business? Should I wait until the economy turns around? If I purchase a business now, will I pay more or less than if I waited a year or two? How do I go about looking for a business? Who can I use to assist me in looking for a business? Should I buy an existing or a new business?
One of the first things is to decide what you're looking for: a well-established business, name recognition, key management in place, a retail or service business, freedom, cash flow, absentee run or geographical location? You may find a few of these in one business, but not all of them. Decide what is most important for you, then make that your key ingredient or ingredients when you start your search.
One question that is often asked is whether it's better to purchase a franchise or an independent business. SCORE and the U.S. Small Business Administration (SBA) have statistics showing a franchise has a higher success rate than an independent business, however there are no guarantees.
Most existing independent businesses and franchises with at least 3 years of cash flow have a higher success ratio than new upstarts. You need to know before you invest what is best for you.
What I've found in selling more than 200 businesses is that the buyer that has a game plan prior to their initial search with some thoughts and ideas has a good head start.
Ask yourself: what is the maximum I want to pay for a business, what do I need for a monthly cash flow, what working capital do I need in addition to the down payment, would I qualify for an SBA loan, can I use my 401(k) or IRA retirement account without a penalty, am I willing to utilize the equity in my home or personal property to acquire an SBA loan?
These and other questions can be answered by an experienced business broker, prior to your search for a business.
The International Business Brokers Association (IBB) is the largest business brokerage organization in the world. I suggest you go to their web site, www.ibba.org to do your homework.
Lastly, the market has picked up in 2011, businesses are selling again, buyers are looking for good businesses with stability and yes there are some good opportunities out there. Make sure to utilize the services of an experienced broker or intermediary.
Understand this is totally different than buying a home, the normal time frame to find the business of your dreams is now about six months. I hope this has been helpful and I thank you for your time.
Janke can be reached at
[email protected]