Looking to buy a business? Here’s everything you must consider

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Are you looking to buy a business? Or did you lose a job and have found that the prospects of getting another similar one are not that positive. You may also be thinking about buying a business as an investment, which can be lucrative.

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Whatever your reason for looking to buy a business, there are many things to keep in mind. Simply coming up with the idea to buy a business is the easy part. Now you must figure out where to look for businesses to buy and look into the legal steps that are needed to get a deal done.

Start here: why are you looking to buy a business?

Before we get into how to buy a business, let's talk about your reasons for wanting to buy one. Some people decide to buy a business because they want to be their own boss. They don't like reporting to a manager, so they decide to buy a business so they can be the boss instead.

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Another reason some people buy a business is because they think they can make more money owning a business instead of working for someone else. However, for most people who buy a business, this won't be true.

There are many expenses associated with running a business, so you may find that you end up making about the same amount of money you made working for someone else. The biggest difference between running your own business and working for someone else is in management.

In some sectors, you might be able to make more money running your own business than you do working for someone else, but that shouldn't be your primary reason for buying a business. There are too many factors to take into consideration, so you shouldn't buy a business for the sole purpose of trying to make more money than what you make as an employee.

One problem with buying a business to make more money is the fact that many people don't feel fulfilled even if this goal is reached. Money shouldn't be the only reason you buy a business. It can be a nice bonus, but it won't make you feel fulfilled.

To get an idea about whether money is the main reason for buying a business, you should pause for a few minutes and think about what money means to you. Close your eyes and try to remember your first experience with or memory of money.

Your relationship with money today has been influenced by that first experience more than by any other experience in your life. It's important to take some time and think about that experience and either accept the narrative it created in your life or work on changing it.

Thinking about a business as an investment instead of just as a way to make more money is a smart way to see things. Your first experience in money can make it easier or harder for you to see a business as an investment in the long-term future of yourself and your family instead of just a short-term way to make money immediately.

If you already own one business, adding another business can help you scale up your portfolio. If you don't own a business already, then buying one is a great way to start building multi-generational wealth.

The power of compounding growth will go a long way in helping you build wealth that will last for generations. Having a business to leave behind to your heirs is an excellent way to leave a long-lasting legacy that will do more for them than a pile of money will. The ability to earn more money is worth more than a static heap of money because you can add to what's in the pile instead of just spending through it.

Choosing a niche in which to buy a business

Now that you know why you want to buy a business, it's important to start thinking about what niche you want to work in. Even if you have some idea about what industry or business you want to be in, there are different angles to take.

You should choose your niche wisely because it becomes such a huge part of your life. You become that niche, and it becomes you. Your niche becomes your life. You will read about all the time, talk about it and innovate in it. You will tweet about it and shoot videos about it.

To identify your niche, start by thinking about your interests and skills. This should be an obvious question, but it's only part of the puzzle. You may have quite a few interests, so it will take some time to narrow down that list and pick the one you like so much that you are willing for it to become your life.

You must also take into consideration your skills. And you don't want to choose a niche you don't know anything about. It must be something you are skilled at and knowledgeable about.

After determining your interests and skills, it's time to narrow the field further. Start thinking about some problems you can solve. A successful business is one that finds a way to make itself indispensable, and the way to do this is to find some problems to solve.

If you're having trouble coming up with any problems that need solving, spend some time looking at forums like Quora or other forums that are related to the niche you have chosen. Looking at the topics that are being discussed will give you some ideas about the problems people are having.

After figuring out a problem to solve, it's time to check out what the competition is doing. Try to think of some ways you could improve upon what the competition is doing. When you're buying a business, some procedures and products will already be in place, but when you take over the reins, you'll want to put your own spin on the business.

When you've narrowed down your list of possibilities to a single niche, it's time to start thinking about what kind of business you want to buy within that niche. There are different ways to approach the same problems, so you want a business that you believe in and that is profitable.

How to find a business to buy

After you have thought about and decided why you really want to buy a business and you've chosen a niche, it's time to start figuring out how to find a business that's for sale. Among the methods that can be used to find a business to buy are brokers, online registries, initiating a search on your own and connecting with family and friends for referrals.

Let's start with brokers. They enable people to buy and sell businesses, and they make sure all the details of the transaction are taken care of. Brokers enable you to search by geography, cash flow, industry and other metrics. Some brokers allow you to set up alerts so you can be notified when a business that fits your criteria goes up for sale.

If you don't want to use the services of a broker, but you do want some assistance searching for a business to buy an online registry is a good middle ground. Online registries allow you to locate a business you are interested in buying using various criteria such as geography, industry or other factors. Some examples of online registries are BizBuySell.com, BizQuest.com, BusinessesForSale.com, BusinessBroker.net, and BusinessMart.com.

An online registry may be the easiest way to initiate your own search for a business to buy, but there are other ways to do it. One problem with striking out on your own is the fact that it can be difficult to find businesses that are for sale.

Some business owners don't widely publicize the fact that they are selling their businesses because they don't want their employees or customers to leave. As a result, initiating a search on your own will still require you to put some feelers out to lawyers or accountants who work with small business owners.

You may also want to start contacting individual business owners on your own and make an offer to buy their business. You should make sure you have an idea about what the business is worth and what you are willing to pay for it before you make an offer.

Don't demand an answer immediately, but simply say that you'll give them time to think about it before you circle back. This strategy may also give them a chance to contact other business owners in the space and possibly connect you with an offer you didn't know about.

Paying for a business

As you begin the search for a business to buy, you'll start to see prices attached to the businesses you find for sale. The niche you have selected will inform the multiple you will pay for the business.

It's natural to make the decision on which niche to buy into all about money. However, it's best to choose your niche first without thinking about the money.

You should have a basic understanding of how investing works before you buy a business. For example, let's say the business you are looking at makes $500,000 per year in gross revenue, which is the money it takes in before paying any expenses.

The business earns a profit of $300,000, meaning that after all the expenses are paid, there's $300,000 left each year. Depending on what niche the business is in, one possible multiple you might pay is three times profits. That means you would pay $900,000 to buy the business.

After determining what multiple you should pay to buy a business in the niche you have selected, it's time to do some due diligence on the businesses you are considering. Not every business will be worth the multiple you have selected for the industry you are looking at.

In some cases, you may see an immediate way to improve the business you are looking at buying. That could mean it would be a good idea to pick the business up at a steal so you can fix the problems with it. However, some companies cannot be saved. It's important to choose your battles carefully if you're looking at businesses that aren't doing very well.

Be sure before you buy a business

When you finally come to an agreement to buy a business and settle on a price, you come very close to making your dream a reality. Before you sign on the dotted line, there are a couple of other things to consider.

Buying a business involves a major life change, so you must be sure that you're making the right decision. You must be ready for the responsibilities of owning a business and be ready to commit the time and sweat equity it will take to operate it.

To make sure you are ready to own a business in the niche you have selected, think back to your schooling. You went to school for about 13 years and spent the time not only learning but also trying to figure out what you like to do and what you are good at.

Along the way, you took various tests and exams to rate your abilities and skills to see whether you would be a good fit for college or university. In the U.S., the SAT is the most common test people take to find out whether they would do well in college or university.

If you attended college or university, that took another two or more years of your lifetime. In all, you spend about 20 years planning your career, but despite that, many people still hate their jobs. The last thing you want to do is buy a business that will give you a job you hate.

Not only are you stuck with a job you hate, but you're also stuck with a business you hate. You won't be successful in business if you don't love what you do, so it's worth it to take some extra time thinking about your situation and where you want to be in life before you buy a business.

What kind of business owner are you?

If you've passed the final check and decided that buying a business is right for you, then it's time to sign on the dotted line. As you start to settle into your new role as business owner, you'll start to figure out what kind of business owner you are.

Some business owners are artists, while others are managers, leaders or entrepreneurs. As you embark on your journey, you should surround yourself with people who complement you. Artists may benefit from having another artist to bounce ideas off of, but they also need other types of employees who are good at other aspects of running the business.

Artists are creative visionaries who can create something from nothing. An example of an artist is Steve Jobs. On the other hand, a manager or leader is great with people and running the day-to-day operations.

Entrepreneurs are excellent at bringing a team together to run a successful business. They are hustlers looking for opportunities to take advantage of, and their primary focus is money.

Some business owners become serial entrepreneurs, like Elon Musk, who currently runs Tesla and SpaceX but was also involved in the formation of Zip2, which he sold to Compaq, and X.com, which later became PayPal.

Final considerations when you buy a business

When it comes to buying a business, there is no batting average. Warren Buffett, known as the Oracle of Omaha for his ability at picking stocks, advises investors to wait for the right stock to come along before swinging, just as batters wait for the right pitch before they swing.

The same holds true when it comes to buying a business. As long as you have a day job that pays the bills, take your time and assess 10 or even 100 businesses before you buy one. Whatever business you buy, you will have to live with for many years, so it's important to transition slowly to make sure you are choosing one that will pay dividends for years to come.

You should also think about the legal organization you want your business to take. When you buy a business, it will probably already be organized as a limited liability corporation (LLC), S corporation, C corporation or other type of business entity.

You may wish to change the type of legal organization into an LLC if it isn't already one. The best innovation for business in North America is the LLC because if things don't work out, you move along and, in the worst-case scenario, declare bankruptcy to get out from underneath it.

Being able to avoid some legal liability takes some of the pressure out of being a business owner, but that doesn't mean you should buy a business lightly. Running a business requires you to be frugal and cautious when spending money.

If you aren't careful with how you spend money, you might do well when the economy is good, but then when tough economic times arrive, your business will likely underperform. Further, being an entrepreneur is cool these days, and almost everyone wants to be self-employed.

However, people don't share their horror stories about owning a business. After you buy a business, you will find that you're suddenly working much longer hours than you did when you were working for someone else.

Aside from the long work hours, the anxiety and stress of running a business could also mean you get less sleep than you were getting when you worked for someone else. The burnout rate also tends to be very high among business owners, so self-care is a must if you are in it for the long haul.

Most people don't realize that burnout is a real possibility and how serious it is if it occurs. Thus, you need to know before you buy a business how you will handle the issue of work/ life balance. If you aren't prepared for that aspect of owning a business, you are in for a rude awakening.

Deciding to buy a business is an exciting decision, but there is a lot to think about throughout the process. It takes quite a bit of planning and preparation to ensure that you are making the right decision, but when you do start moving, owning a business can be extremely rewarding.

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