Buying a business
There are many reasons people go into business for themselves including; to be able to do their own thing, no longer happy working for the ‘boss’, to make more of their own unique talents and of course money.
Before embarking on the process of buying a business, there are a number of important factors that you need consider.
- Am I ready to buy a business?
- What skills, talents and resources do I have?
- Do I have any idea how much time and work is involved in running my own business?
- Have I thought about how much money I’ll need?
- What return am I looking for on my investment?
1. Am I ready to buy a business
What brought you to the point of considering buying a business? Has it always been a dream you’ve harbored, something you’ve been working towards, or maybe circumstances beyond your control such as restructuring or redundancy have been the trigger. Whatever the reason and motivation, there are a number of important things to consider in more depth.
2. What skills, talents and resources do I have?
What is it exactly that you will be bringing to the table? Be specific, what’s your background, your past employment history? Have you been involved in a management role, how about finance, sales and marketing, manufacturing and production? In what position do you feel you excelled (or failed)? Do you thrive when working in a team or do you prefer to work independently? Be realistic and honest, you need to know what you can and can’t do. Highlight your strengths and weaknesses and then decide how you will develop those areas that are not currently a strong point.
3. Do I have any idea how much time and work is involved in running my own business?
Don’t think that because you’re the boss and it’s an established business you’ll be able to take it easy. Unless the business you buy is fully managed and you’re a silent partner, you’re going to have to play an active role. To start with you’ll need to learn about the business so that you understand it, then you’ll need to run the business to keep it going as it was previously. If you have further ambitions about growing the business beyond its’ current size you are going to have to put in more time and energy. How’s this all going to impact on your current lifestyle, on your family and on your leisure time?Be fully prepared for the realities of running a business on a day-to-day basis before you buy one. Try to spend time with someone who already owns a business to get some idea of the reality.
4. Have I thought about how much money I’ll need?
Ok, so you know the asking price of the business, that’s as good a place as anywhere to start. Now, how do you plan to finance this new acquisition? Do you have enough cash available to buy outright or are you going to need to arrange finance? Who will provide the money, is it a financial institution, a partner, a well-heeled relative? Are you considering mortgaging your home? How will you service the loan? How will you pay your own living expenses? What about the future? Can you access more funds if and when needed? Will you be able to build up a nest egg for the future?
5. What return am I looking for on my investment?
Is it realistic and achievable within the industry you have chosen? Maybe you are “buying a job” or maybe you have plans of becoming filthy rich. Does the business you are considering fulfill these ambitions or do you need to rethink your plans and find another business more suitable. Better to postpone at this stage and start the search again than to buy the wrong business.
A professional REINZ Accredited Business Broker can help you work through these issues and more.
They will be your best source for answering questions and resolving concerns. They’ll even address issues you hadn’t yet considered and in doing so will save you time and money.
Related: Why use a Business Broker
If you are serious about buying a business, help your Business Broker to help you. You’re about to embark on what is almost always a challenging yet highly rewarding experience, remember to have fun along the way.
Related: What does a Business Broker do?
So you are now ready to start your search, click here to Contact Sharon, I will guide you through the process of finding the right business to suit your needs, or dive right in and View my listings
February 24 2008 06:02 pm | The Professional Business Broker
» Looking to buying or sell a business? - Unconditional on 02 Mar 2008 at 7:44 am #
[...] own blog suitably called Business Broker, and on it she has recently written some great posts on Buying a Business, Selling a Business, 12 questions to ask a Business Broker and What does a Business Broker do [...]
Paul Rhodes on 18 Mar 2008 at 10:15 am #
I have been selling business now for 5 years, 4 of those with New Zealand’s largest brokerage. When I first started out in the industry I was clearly told not to work with purchasers, instead I was told to list a good business and the purchasers would come to me. Because of this mentality I believe that many buyers have bad experiences with brokers, feeling that the service they receive was unfocused, which in most cases is true.
I now believe that the market is changing and that going forward buyers are going to come into a “buyers market”. The boomers are going to sell up in the next 3-5 years and with that much quality stock coming up their will simply not be enough money/buyers to go around.
I now happily work with buyers that are prepared to prove to me their ability to purchase a business. That may mean they show me their bank account or position of financial statement. If I am convinced they are genuine I will then go and find them a business specifically to meet their needs. At the end of the day, the worst thing that can happen is I will end up with more listings to sell!
Sharon James on 21 Mar 2008 at 12:23 pm #
Thank you for your comments Paul, it is always enlightening to hear of other salespersons experiences within the industry.
While traditionally it is the seller/vendor who is the Principal and who as Agents we owe the fiduciary duty to, the prospective buyer/purchaser is also owed a duty of care. It would indeed be most unfortunate if buyers felt they had received unfocused service.
From my own experience I find that by treating all clients whether they are buyer or seller, rich man or poor man, dreamers or realists, with courtesy and respect ensures that they continue to come back to me.
stephen dixon on 10 Nov 2009 at 10:55 am #
i am looking to buy a small buniess can you help me?
Sharon James, Waikato Business Broker on 16 Nov 2009 at 12:28 pm #
Hi Stephen, I may be able to help you, please either give me a call (027 235 4771) or email me directly (sharonjames@nzbusinessforsale.co.nz) Thanks.
Puja Singh on 22 Jan 2010 at 7:27 pm #
knightsbridge business sales There are many reasons people go into business for themselves including; to be able to do their own thing, no longer happy working for the ‘boss’, to make more of their own unique talents and of course money.
Before embarking on the process of buying a business, there are a number of important factors that you need consider.