Figuring out how to buy a business takes a lot of careful planning and decision making. If you’re asking yourself how to go about doing that, then you’re not alone. Many people are looking to create a revenue stream for themselves, whether it’s a passive stream or something they work at every day.
These tips will help you start on the path to success.
The first thing you’ll need is ideas. You may already have some idea of the type of business you want to buy, but let’s consider the pros and cons of each. First you’ve got to decide whether you want an offline or online business or something in between.
With an online business, you don’t have the expenses associated with a physical location, so it is a less expensive way to do business. However, it can be more difficult to find customers if you don’t know much about marketing an online business. For instance, social media marketing could be crucial to the success of your online business. How to optimize your website for the search engines is also important, and would necessitate the need to hire an SEO company of freelancer. Although expenses for such marketing services are still likely much less than the expenses associated with having a physical location.
Working at home has its challenges too. You may have the constant threat of distractions from family members who don’t understand that you’re working. Also it can be tempting to work round the clock because you never leave your place of work.
Now that you know the type of business you want, it’s time to start looking at businesses that are available. This is assuming you want to buy a business that’s already established.
In some cases you may know of an established business that’s for sale. If this is the case, you should do extensive research to make sure that the business is really worth the price they are asking. Countless business owners find themselves in a bind because they did not do their due diligence to make sure that the business is really worth the asking price.
The Small Business Administration (SBA) offers some great tips to help you out with putting a value on a business. Online platforms like ‘Flippa’ are also a good start to brainstorm and get an idea of the types of online businesses and websites available for sale and their asking price. SBA also offers additional tips on how to buy a business.
Now that you have some ideas on how to buy a business, it’s time to figure out how to get the money to buy a business. Part of the valuation process should involve sitting down with the current owner to go through the business financial information. You should be able to see how much profit it is making, what its expenses are, and other factors that go into running the business.
With this information you’ll start to write your business plan. You may consider hiring a professional business plan writer and a CPA to handle this for you. The plan should include details about how you’re going to run the business, how profitable it is, and just general details about the business.
Once your plan is finished, start shopping it around at local banks and the local branch of the Small Business Administration, assuming you don’t have the required capital to start. Also check with the city you live in to see if they are running any programs designed to draw businesses into their area. Such programs could offer grants and/or tax breaks to start-ups.
After you have the money in hand, it’s time to get down to signing the appropriate documentations. It’s recommended that you have a lawyer and / or business real estate specialist help you with the transaction so that everything is covered. This will protect you and your investment.
Then it’s time to start running your business. Of course the process depends on the type of business you bought. If you have employees, you’ll have to run payroll and pay payroll taxes. If you don’t have employees, you can likely report your earnings on your individual income tax statement.
It is recommended that you form a single person LLC to remove liability from yourself and place it on your business. A single person LLC is known as a “disregarded entity,” so you can still report your income on your individual taxes even though you yourself do not hold liability. Make sure you seek proper legal advice from a professional if you’re not sure how to proceed. A small investment today could save you a huge loss in the future.
As you can see, there’s a lot to discovering how to buy a business, but if you do it carefully, the rewards are tremendous.