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Want to Buy a Business? Here’s What You Need to Know

by admin

If you are looking to get into business for yourself purchasing a business is a great way to get a head start. An existing business already has a number of important features that can take years of hard work to build, including trained employees, equipment, a customer base, and (hopefully) positive cash flow.

A fundamental feature of a profitable business is careful decision-making. If you want to ensure the greatest likelihood of success with your new venture, there are several very important factors to consider before making a commitment to buy, including evaluating the current financial state of the business, obtaining details on what will be included in the transaction, and verifying the type and amount of Vancouver business insurance you need.

Finding the Right Business

Buying a business isn’t like buying a house; there is no single central database of listings. Unless you are making an offer on a business you already know, working with a business broker can be a huge asset. Not only will they be able to locate businesses of interest, but they can also pre-screen them to make sure they are good potential candidates.

Why is the Business for Sale?

The first point you’ll want to ask is why the business is for sale. While even failing businesses may have some value to the right buyer, most businesses are sold when the current owner has decided to move on to another venture, is retiring, or has decided it’s the right time to cash out on a profitable enterprise. The important factor here is that the reason for selling is truthfully disclosed.

Doing Your Due Diligence

Take. Your. Time. The same thing that is driving you to want to own your own business may also tempt you into diving in head-first. Nothing good comes from hastily made decisions; instead, take your time to verify the business. Have an independent business valuation firm help you assess the current value. This may not be what you actually end up paying, but it will give you an idea of what the business is worth.

You will also want to have a professional accountant go over the books in order to verify the financial health of the company.

Getting Your Funding Organized

Another benefit of buying an established business over building one yourself is the comparative ease of securing funding (if you require it). Having a few years of positive revenue history makes banks and other financial institutions more willing to extend business loans than they would be to supporting a start-up. While you do have other options if a business loan isn’t right for you, such as partnering with a venture capital firm or finding your own investor, a business loan allows you to keep all the equity in your business.

Carefully Reviewing ALL the Details

It’s all in the details so don’t rush this step! You’ve already studied the business, done your due diligence, and reviewed the books, however, the little details in the sales contract are equally as important. If you don’t already have one, an attorney can be a huge asset in reviewing contract details. Things to pay attention to are:

• Outstanding legal contracts between the business and suppliers, customers, and employees
• Any existing legal or financial liabilities (like unpaid debts, or warranty cases still pending)
• Inventory
• Business assets (including equipment)

Securing Business Insurance

Your final step before you are ready to go is to ensure that you have the right type and amount of business insurance. Each industry will have its own inherent risk profiles and legal obligations, but having the right Vancouver business insurance is vital to protecting your investment. Working with an insurance broker can help you quickly evaluate all your options and chose the best coverage for your needs. Business insurance claims can be very costly, so when in doubt it is always better to be over-insured than under; the premium is a small price to pay for peace of mind.