Acquiring or buying an existing business is one of the best ways to be your own boss. Because the business has been in existence for some time, it is easy to determine its profit margin, customer base, the kind of challenges the business faces and how successful it will be in the future. There are also disadvantages to acquiring an existing business and how you handle these will determine your success or failure. Here is what to look for when acquiring a business.
Instructions
1. Make a checklist of the businesses you are looking to acquire. Take note of your area(s) of expertise, interest, strength and weakness, as these will determine whether you are successful in the business or not. Decide if you want a stand-alone company or a franchise. Research the benefits of each and decide which of these meets your needs.
2. Research the industry to which the business you are looking to acquire belongs. Note the present and future trends affecting the industry. Determine if the business is poised to grow and expand or if it has matured to a stagnant standing within the industry.
3. Research the location of the business. This is very important if you are going into the retail or other trading industry. If the business is not retail related, research the competition. Note other competing products and services in the industry and their pricing structure. Compare them to the business you are looking to acquire. Look at the lease if applicable and make sure you are comfortable with it.
4. Look at the balance sheet of the business for at least the previous five years. Have a tax professional look at the balance sheet and advise you on profitability. Check the business' growth trend-line since this will tell you about future profit potential. Look at the make-up of the customer base to determine if the business caters to a particular group. Decide if you can effectively market to this core group and be profitable.
5. Contact the Internal Revenue Service (IRS) and your state’s taxing authorities to see if they have withholding tax and liens against the business. Make sure all payroll and tax issues are resolved and up to date.
6. Contact the business owners and arrange a meeting to determine the terms of sale. Arrange financing with a bank if applicable. Negotiate and acquire the business when you are ready.
