Every day, millions of Americans pursue the dream of owning their own business.
Ownership brings the freedom to make the decisions about how a company is run, which can pay off in far greater financial rewards than a regular paycheck. Best of all, there’s a sense of pride that comes from building a legacy that can be passed on to others.
That said, the rewards come with risk. Being the owner of a company is a high-pressure position. A paycheck is steady and reliable, but profits often are not. Making the wrong decisions can leave you with nothing to pass on (or something that no one wants).
Purchasing an existing business can be the ideal strategy to avoid becoming an owner who shuts down their business in the first year. It’s a complex process — the most complicated purchase you may ever undertake. The list of stakeholders and concerns you must address is long — customers, employees, equipment and inventory, to name just a few.
Plan to spend several months shopping for the right business, from researching the market, negotiating with the seller and eventually closing on the purchase itself.
If you’ve decided to buy a company that is already in existence, here’s a checklist for managing the process.
Related: 10 Questions You Must Ask Before Buying a Business
1. Decide what kind of business you want
Do you want an independent business or a franchise? Buying a franchise offers a proven model with plenty of support and a network of resources. With an independent company, you’re free to make decisions on your own — which might suit you better if you prefer to go it alone.
If you’re unsure, decide on what industry you may want to enter. What are you good at? Do you have any expert skills that would be useful in a business? How will you manage your time?
2. Assemble your team
You’ll need a crew of experts to handle the complicated financial and legal issues that are part of the purchasing process. You’ll need an attorney and an accountant, and when buying an independent business, you should also work with a business broker. The broker will help you locate and vet potential buyers. With solid knowledge of the market and the industry you’re getting into, they’re a crucial guide, even for experienced business owners.
No matter how much more your team may know about the purchasing process, never forget that you’re in charge. The team works for you, and while they’ll usually give you good advice, the decisions are yours to make. It’s your name that’ll be going on the door and your money that’s being risked.
3. Search for available businesses
You won’t find a “for sale” sign outside of a business worth buying. Just like the Multiple Listing Service (MLS) that realtors use, there are a number of reliable sources you can turn to when you’re looking to buy a business.
The website BizBuySell is a trusted directory of available companies, you can find expert guidance at Transworld Businesses Advisors, and trade shows are another fertile source of prospects.
Related: The 4 Biggest Red Flags to Look for When Buying a Business
4. Secure financing
Don’t listen to anyone who says that plunging your life savings into a business means you’re admirably devoted to its success.
A small business loan or other financing is the smarter way to go, especially for hard assets (equipment, buildout, etc.) If you get funding from investors, be clear on how they will be involved, what their share of revenue and expenses will be and other issues your accountant and attorney will work out with you.
5. Close on the sale
Huddle with your team before closing to make sure everyone understands the sale. Be clear on what you’ll be walking into, like employee and vendor contracts, inventory, accounts receivable and the state of the lease (if there is one).
Is there an opportunity to renegotiate the lease with the property owner? Will the seller stay in the business to help you transition to total management, or do they expect to hand you the keys and wish you luck on their way out the door?
Once again, this is where you’ll be glad you’re working with an accountant and an attorney.
Related: A Comprehensive Guide to Buying a Business
6. Step into your office
Your sale is complete, but the purchase is not done. Your first 30 days in the business should be a time of transitioning into ownership.
You should be getting to know your employees and how they do things, as well as giving them an opportunity to get to know and trust you. Clean the space, interview employees, and listen to what they tell you. Don’t make any quick changes until after the first month.
Don’t forget one of the best parts of the post-closing process: Celebrate! Take time to reflect and enjoy all that you’ve done to make this dream come true.
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