There are many search tools available on the web to locate potential businesses for sale. These listings provide a snap shot of the opportunity for the prospective buyer. Working with a business broker helps potential buyers to not just find an opportunity but also evaluate the right opportunity. Beyond the business listing, here are some core things to look for when evaluating the right business to buy.
Consider a type of business that aligns with your goals, interests and capabilities
Before beginning the search for individual businesses for sale, you can sit down with a business advisor to determine your financial capabilities, your skills and experiences as well as your personal life goals. Establishing these criteria early on in the buying process will help you to narrow the scope of potential businesses you might consider buying.
You can immediately rule out industries that do not capture your interest and imagination. You can also honestly assess your skills and experience to help you eliminate industries that might be out of your range of capabilities. If you want to try your hand at a relatively new or complex business, you might consider looking for businesses that offer more extensive new owner training, perhaps purchasing a franchise is an option you should consider. Franshises offer a great opportunity for a business model that has already been researched and owning a franchise comes with the support of a parent company. Alternatively, you might begin by identifying a personal talent, skill or experience that might lead you toward a specific type of business. As you continue searching, these criteria can become more refined.
In addition to considering your fit for a particular type of business, you can also evaluate potential businesses according to basic criteria such as the geographical location, the required level of time commitment and the selling price. Determining where you would like to live and work will help limit your search to businesses in a certain area. When considering location, you can also narrow your search scope by considering the cost of doing business in key regions.
Do you want to be heavily involved in the day-to-day operations of the business, or would you rather be an absentee owner? Examining size and sales volume along with number and quality of employees will allow you to evaluate businesses according to their required level of owner involvement.
Of course, it is also critical to determine your purchasing capabilities. While new owners can receive loans through banks and the Small Business Administration, you might also want to evaluate businesses for sale based on availability and level of owner financing.
Find out why the business is for sale
Considering the above criteria will ultimately lead you to some particular businesses for sale. At this point in the process, it is good practice to ask why the business is being sold. If the price seems unusually low but the business is being marketed as very profitable, the owner may be attempting to conceal something. If the business is being sold because of poor financial performance, you may want to reconsider a potential purchase. However, you might also probe further and determine why the business is performing poorly. If it seems like something you can fix based on your skills and experience, you may think about moving forward.
Fortunately, working with a business advisor means that the businesses you encounter are have been reviewed to a certain extent by a professional. Working with a business advisor will help you to coordinate the due diligence, and an expert team of advisors, lawyers and accountants will notify you of any potential red flags.
Determine if the particular business and its industry have a bright future
As you get to the due diligence stage, you can evaluate businesses for sale according to more specific criteria. The due diligence stage of the buying process will help you to learn about the future and perception of the industry as well as the profitability of the individual business within the local market.
You can answer these questions by closely examining a business’s financial documents, such as sales records and tax returns, which give you an accurate indicator of the business’s future success. This process will help you to answer both straightforward and intangible questions about current value, growth potential, customer base, assets and inventory, and relationships with vendors and creditors.
If you are considering the purchase of a small business, Transworld is committed to helping you find the perfect business for sale. Transworld’s advisors will meet with you to determine your abilities and interests, educate you about the search and buying process and connect you with businesses that match your unique criteria.