Buying a business
If you're thinking about running your own business, buying a company that's already established may be quicker and easier than starting from scratch. However, you will need to put time and effort into finding the business that's right for you. Also, the costs involved in buying an existing business can be substantial and should not be underestimated.
Regardless of a company's past performance, an existing business or franchise will, at the very least, have a history from which you will be able to make certain decisions. Even if the company was not profitable in the past, your strengths may lend themselves perfectly to turning it into a viable venture. Furthermore, you have the ability to verify what the company did in the past that resulted in the current status of the operation.
- The business is 'up and running' already -- generating cash flow
- It is likely to have an existing client base.
- Processes and staff established
- Existing customers and referral network
- Seller will likely lend support
- Seller may assist with financing
- Typically, easier to secure affordable financing
- There is a tried and tested business formula to emulate.
- Lower risk of failure
- A large investment is often required
- Costs related to transaction (agents, surveys, accountants, lawyers, etc.)
- Time and travel required to research opportunities available.
- May require relocating your self / family.
Business brokers are individuals and firms who specialize in the buying and selling of businesses. As in real estate transactions, both the buyer and seller may work through a broker. Brokers typically work with buyers and sellers on transactions of less than $10 million. Transactions above that typically involve mergers and acquisition (M&A) specialists at banks or investment banking firms.
Avoiding business opportunity fraud
If you're a prospective business owner, beware of advertising that may appear to offer a business for sale, but that may actually be a fraud or scam. Often advertised as business opportunities, these "programs" turn out to be little more than pamphlets or nothing at all. Spotting fraudulent business opportunities is no easy task, but there are certain clues: One may be the type of business opportunity being advertised. Fraud is most often associated with vending machine, display rack, pay phone, medical billing, work-at-home, and some internet-related business opportunities.