5 Factors to Consider Before Buying a Business

5 Factors to Consider Before Buying a Business

Once you have come to the decision to buy a business, you may be both excited and anxious about the next steps. Once you have chosen the industry and perhaps even the type of business, there are a number of items to review as you move forward in the process. Here are 5 factors to consider before buying a business:

1. Business Valuation

Before anything else, it is important to determine if the listing price is reasonable compared to the estimated valuation. A broker may not be able to tell you the exact value for a business without knowing the inner workings of the business, but by reviewing the location, determining potential profit and popularity, a value can be estimated.

2. Location, Location, Location

It may sound cliché, but a business with a great location is a valuable investment. When looking at listings, keep in mind neighborhoods that might be a lucrative choice for your business’ target audience. If you are perhaps unfamiliar with the area or are unsure of which would be the best choice, ask a business broker who is not only well-versed in the industry, but also the best neighborhoods to search for the right business for sale.

3. Established Customer Base

When buying a business, one should consider the current profitability or its potential once new management is established. If you are looking to see a quick return on your investment, consider asking the seller about its customer base. A business with loyal customers is undeniably more profitable than one still trying to get on its feet. Although an established customer base will likely make the business more expensive to purchase, your broker can help you determine if it is worth the extra money. Ask your business broker to help you make a list of your highest priorities to find the right business for you.

4. Industry & Competition

Like every other factor mentioned, the industry and local competitors will be aspects to consider before making a decision. Is the business you are purchasing the only one in the area? If not, how is the customer base currently divided between the competitors?  An experienced business broker can help determine similar businesses in the area – both by industry and target audience. This can help make or break a deal for you.

5. To Broker or Not to Broker? Definitely Broker.

Last, but certainly not least, hiring a broker will make the entire process that much simpler. Transworld Business Advisors Houston has a network of buyers and sellers, as well as advisors who specialize in specific industries. Without a doubt, your broker will understand your needs and ensure you find the right business to buy. From finding the right listing to ensuring confidentiality and advisement until the dotted line is signed, a Transworld advisor is with you every step of the way.

If you are looking to purchase a business in the Houston area, check out our current listings or contact a Transworld Houston broker today. Call us at 281-769-4277 to get a free consultation. With years of experience under their belt, our business brokers will be your partner throughout the process, from beginning to end.