Some entrepreneurs believe existing businesses, with an established business valuation, pose less risk in the purchasing process. While this may be true, due diligence remains essential in the purchase. Purchasers must fully understand what is being purchased and what assets are coming in the deal.
Anyone who has decided to purchase an existing business must be sure that the decision is sound. While many entrepreneurs understand their own needs and desires, there are a few important tips to follow when researching the purchase of an existing business.
1. Interest Identification
Every entrepreneur must identify his or her own interests. While this is typically the starting point for most who want to purchase a business, others are still unaware of their true business desires. If you are not sure what business would peak your interest, begin by eliminating those that don’t interest you at all. You will be left with viable choices in the remaining options.
2. Think About Yourself
What are your talents? What are your strengths? What are your hobbies? This may sound like a job interview, but these are questions that will help you determine what business will work best for you. You will find the most realistic business options through these answers. For example, you wouldn’t purchase an art studio if you had no idea how trading art actually works.
3. Know Your Conditions
You’ll want to know what business conditions are acceptable to you. For example, does the business require a great deal of time from you? Is it in a favorable location for you and your needs? Understand your personal terms before considering purchasing any existing business.
4. Put it in Numbers
Quantify any business in your radar. Is it profitable, and therefore worth the purchase? The asking price must also be reasonable. Consider why the business has been placed for sale, and weigh all these quantifiable reasons against your personal needs, desires, and investment abilities.
Next read about the four methodologies used in determining the value of a company.