If you want to own your own business, you may try to build one from scratch. However, there are many options for building a business. You can also choose to purchase a company that is already in existence. If you are interested in potentially acquiring a business instead of starting one from the ground up, there are several vital questions to answer.
Independent Business or Franchise
One decision you must make is whether you wish to buy a franchise or an independent company. Each option presents its own unique set of circumstances. With franchises, you are part of a systematic network built around an established name. There may be stringent requirements regarding the systems and procedures you must follow as a franchisee. Depending on the franchise you choose, the initial cost may be more of a layout.
If you opt to purchase an independent business, you may enjoy the benefit of increased flexibility, but the business may require more research and development to acquire the same level of recognition an established franchise may have. You may also end up paying less since the name is not usually recognizable beyond its current business contacts and location.
Lifestyle Considerations
Another significant factor is the type of lifestyle you enjoy. Different businesses may require different types of lifestyles. If you choose to purchase a restaurant, you may be required to be at the restaurant during times when most ordinary family gatherings occur. For some, that is a sacrifice they are willing to make. Other industries and businesses call for frequent travel. As an owner, you must understand what you value and what you can handle.
Do Your Due Diligence
It is vital that you conduct proper and thorough due diligence when purchasing an existing business. This process requires digging deep into the business records to fully understand the business’s history and more accurately predict its future performance. When conducting due diligence, it is important to hire an experienced business lawyer to ensure that a full examination occurs. Your due diligence search will likely include an in-depth analysis of the cash statements, profit and loss documentation, and any outstanding debt. This search should also include any information about the company’s past or ongoing litigation.
Find Out More
As part of your investigation and research into the business, it is important to spend time speaking to and understanding the people involved. These people include but are not limited to the current owner, employees, and customers. When speaking to the owner, seek to gain an understanding regarding the owner’s motivation for selling, as well as any challenges and successes as the owner. In addition to speaking with the owner, it is critical to speak with employees. As you acquire a business, you also inherit the existing workforce, and their attitudes towards their work and their experience in the company may provide valuable information.
Funding the Enterprise
There are as many ways to finance a business as there are types of businesses. One way is to self-fund, but be careful of using money in retirement accounts that can bring on taxes or other fees. Another way is to work with venture capitalists who want to invest in your business for partial ownership and a seat on your board. Depending on your type of business, crowdfunding is another option. This works for businesses that have a product they can offer as an incentive to invest. The “product” could be your name in the credits of a movie or an art print.
Another popular option is to take out a small business loan. If you have good credit and a solid business plan, talk to banks or check out SBA federally backed lenders. The federal Small Business Association makes it possible for banks to lend money even if there is more risk involved.
Are You Ready to Work?
Although you may avoid some of the challenges involved in starting a new business, purchasing an existing business is still plenty of hard work. In many instances, it requires upfront costs that exceed those of brand new businesses. It can also be a tedious process because some companies have hidden risks that remain latent until the due-diligence stage.
We Are Here To Help
Whether you choose to purchase an existing business or build one from scratch, our experienced team is here to help you evaluate your options and make the choice that is best for you. We also provide a wide range of services to help you protect your investment of time, money, and energy. Call our office today to schedule an appointment or contact us online.