When I think about starting a business, I often think about all of the hard work that must go in at the start; then I think about my puppy. I’m sure you know the drill – kids cry because they want some sort of pet, you buy the pet; you end up training the pet. This was true in my household. My puppy stained carpeting, ripped up pillows, and scratched a hole right through our screen door before running away and upsetting the neighbors with his constant barking. I couldn’t help but think: Wouldn’t it be nice to skip the puppy phase?
The same can be true for business. Owning your own business comes with many stresses, and the initial startup is almost always the most intimidating and problem filled. Between finances, hiring decisions, software purchases, and marketing, it is amazing anyone ever gets those screen doors fixed and carpets cleaned. However, starting a business is exciting for many because it allows a person’s idea to come to life, which makes all of the startup chaos worth it. If you do not have an idea that you are passionate about, but have always dreamed of owning your own business, there is a way to make this happen—the puppy phase is not necessary.
Buying an already existing business can be a great way to “start” your business because it will already have a working infrastructure full of resources you would otherwise have to find on your own. In many instances, finding a good, solid, business that has already proven to be successful will not only be a bit easier at the startup, but will help reduce the financial risk that owning a business will give you.
Unfortunately, buying an already established business can go wrong if you are not careful. Many times a business is for sale because it is out of control and too hard to manage. It is of course possible to turn around a business that is struggling, but it is important that you know what you are getting yourself into before purchasing a business. Below lists a few tips to help you navigate your way through purchasing a business and how to successfully analyze it (instead of letting the current owner do it for you):
- Take Advantage of Due Diligence – Once an offer has been made and accepted, you will have an opportunity to evaluate whether or not you think the business is worth buying. This period of time is called due diligence, and you will have access to the company’s books and records. During this time, make sure you stay busy checking up on any financial issues the business may have! It would also be a good idea to go through these books with an accountant to help you identify any financial risks that may come with the specific business.
- Talk with Customers and Clients – Take time out of your day to talk with any customers or clients who have worked with the business before. If the business has a bad reputation, you will have a lot of clean-up work to do. While this is entirely possible, it is good to at least know before buying whether or not clean-up work is in your future.
- Check Out Competition – While the company may seem like it has a solid business plan and great focus, it will not succeed if it is not in demand. Before buying, check out the competition your potential company will be up against. Does it seem like there is room for it to grow in the future? Is the company current, or will it soon be obsolete? These are questions to ask yourself as you research the marketing side of things.
- Know you Can Negotiate – A lot of negotiation comes into play when purchasing an existing business. If you find a business with a few things you don’t like, do not immediately write it off as a “no.” Before making a final decision on whether or not you’re going to take the next step in researching the business, talk with the existing owner and see if they can offer you any warranties or fix any holes you may find.
While more research will need to be done, these tips should help get you started on the initial overview of an existing business. Whether it becomes a turnaround situation or a business already yielding high profits, it is always a good idea to do some initial research to make sure you can avoid that puppy phase. After all, why would you want an already existing business with tons of startup work – it’s not as cute.
Amanda DiSilvestro is a writer on topics ranging from social media to voip phone service. She writes for an online resource that gives advice on topics including phone systems to small businesses and entrepreneurs at Business.com.