Having your own business is great. Building one from scratch Really hard. Which is why some entrepreneurs opt to buy an existing business outright. There are other reasons to buy a business too, like acquiring an up-and-coming competitor, or just building your investment portfolio.
At some point, while jumping through legal hoops, you might have forgotten that you just became a small business owner. Congrats! Your new life awaits. And if your brand new business needs bookkeeping, Bench can help with that.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.
The most popular methods to buy a business with no money of your own are SBA loan and Seller financing. There are more ways such as getting an equipment loan, depending on the type of business you are buying.
As discussed a bit at the beginning, there are multiple ways of closing a deal with no money of your own. Seller financing is the most popular method, where the seller allows you to pay off the business price over time.
If you have 1000 people on your friend list, all know you are looking to buy a business. Tell everybody in your friend circle that you are looking to buy a business. This is so effective- someone from your community might see someone who is selling a business, and the first person that comes to their mind would be you.
Now that you have found a business to buy, you need funding. Luckily, there is an organization named SBA (U.S. Small Business Administration), which mainly helps people like you to purchase small businesses.
Now say you got an SBA loan of 70% of the purchase price, how do you pay the rest Own money Absolutely not! You take an equipment loan to cover the rest. In most cases, SBA + Equipment loans together leave some good money on your hand even after paying the purchase price, which you can use to develop the business when you start.
One great side benefit of seller financing is that it keeps the seller indirectly tied to the business for a while. You can look at this as a sign that the owner believes in the business and is confident that, under the proper ownership, the business will generate enough revenue for you to repay them on time.
You can also cobble together various methods to buy a business without paying any cash upfront. For example, you can use income-generating business assets to pay off the seller quickly. In addition, you could bring in a few additional silent partners to help you acquire the business and then buy them out later.
But buying into an existing business with established demand and excellent profits can help reduce some of the stress and risk to you. Learn more about the pros and cons of purchasing a business, the steps to buying a business, the types of businesses you can buy, and tips to ensure that you're pouring your resources into a viable company.
Financials and ROI aren't the only important considerations when making a responsible business decision. You also need to understand the company and industry. This will help you offer fresh insights that can take the company you acquire to new heights.
You should also have a working knowledge of industry trends and the company's offerings, business model, and target audience. Understanding these things will help you bring fresh insights and innovative ideas to the company.
There are numerous other factors that you should consider before choosing a business to buy. Consider your interests, passions, education, and professional experience to narrow down your ideal business opportunity.
The reasons people may choose to sell their business are endless. Maybe they're retiring, they always intended to sell, profits are in the gutter, or they're struggling to catch up to more established competitors.
Some of these issues are yellow flags but could potentially be resolved with some extra funding and a better business plan. Other issues may disqualify a business altogether. Some red flags include the following:
Every business should have articles of incorporation, a business plan, operating agreements, employee and NDA agreements, and business registration documents. If you plan to buy a company, you have a right to request the chance to review all of these. But take extra care to review the following:
In addition to checking in on the businesses standing with the state, you should also ensure that it complies with local laws. They should have all city- and state-mandated licenses and permits on file.
Examine tax and financial records from at least the past five years to determine if the business is following the law and how much it's worth. The financial records you should review include the following:
If the business already produces fairly stable quarterly profits, you should know how much it's worth now and how much it will make in the future. The process only becomes murky if the business hasn't turned a profit, but you expect it to in the future.
\"If you buy a business, there are customers and clients, systems and processes in place, and documented financial performance that will allow a new owner to predict future income; and the future former owner is a mentor to help the new owner grow the business,\" John R. Allen III, the managing partner of Allen Business Advisors, a business brokerage firm, says.
When you start your own business, it can take several years of trial and error to hone in on your niche and develop a loyal audience. But when you purchase a business, you can skip over this tedious process altogether and enjoy numerous other benefits.
Perhaps the biggest advantage to buying over starting a business is the existing business's potential. You may see growth opportunities the current owner doesn't, or maybe you have a winning business plan in mind.
When you start your own business, numbers are much more difficult to estimate, potential issues are harder to anticipate, and it can be more difficult to secure funding because investors consider start-up businesses higher risk.
If any of these things are applicable and too much of a red flag, pass on the business opportunity. Even if you don't notice any significant issues on the surface, keep in mind that the seller may try to downplay certain business problems.
Many investment experts are encouraging younger generations of entrepreneurs to buy existing businesses. Of course, anyone who has the time, money, and drives to take on a new business and add some value to it could be a good business acquisition candidate.
\"Most existing businesses are a big part of their local community and have considerable goodwill. They're not just businesses; they're part of people's lives and a place where memories are built,\" Kipps-Brown says.
Buying a small business can be an excellent investment, especially if it's already successful, doesn't have a slew of competitors, and isn't drowning in debt. Some savvy small business buys you can make as a new investor for less than $250,000 include:
\"A franchise is a business with training wheels,\" Tom Scarda, the CEO and founder of The Franchise Academy, a franchise coaching firm, says. \"The franchise company holds the owner's hand and teaches the franchisee best practices from Day 1 until the owner sells. The owner will keep almost 100% of the proceeds from the sale of the business and daily income while it operates.\"
There are 753,770 franchises in the United States. They include businesses like grocery stores and gas stations, restaurants, retail stores, auto repair shops, real estate companies, gyms, and beyond.
Buying a franchise is a happy medium between starting your own business and buying an existing one. Of course, the brand name and wholesale purchasing price give you a competitive edge over someone creating a startup.
You will have upfront costs and considerations. But unlike when you start your own business, you are not on your own. A parent company will guide you through the start-up process and operating procedures.
This works as free advertising while letting the public know changes are happening. Then, talk to your employees about your ideas and business plan, and ask them for their thoughts about where you can make improvements.
You should also try to keep in touch with the former owner and decide on reliable legal, HR, and accounting services if you don't have someone on staff to help guide you. You never know when you might have a question or even need business advice.
Because of this massive flood of businesses and the potential employment problem it could create, the Federal government has stimulated Main St. with funding through the SBA to encourage more transactions.
This low cost of capital has made the concept of buying a business make much more financial sense than starting one yourself, or becoming a franchisee. These people are known as Acquisition Entrepreneurs.
Whether you are a novice entrepreneur trying to finance your first purchase of a small business or an established entrepreneur looking to purchase a small business to expand your portfolio, you need money.
What options are available to obtain financing to fund this A bank loan or your own savings Asking a friend or applying for a line of credit There are no rights and wrongs when it comes to getting the money to buy a small business.
The first and easiest source of financing for your next business purchase is using your own money. You might have enough funds in your bank to buy the business. Having stock investments can also be a potential source of funding.
Financing your purchase with cash is a rare practice and if you do this you will forgo the opportunity to further grow your investment through leveraging it. There is almost always a combination of equity financing and debt financing. You can fund the down payment from your personal funds and choose other ways to finance the remainder. 59ce067264