Choosing the right Business

There are many important considerations when choosing a small business to purchase – both to maximize your success, and enjoyment. Your personality, skills, risk tolerance and financial situation all help to determine what type of business will be suitable and successful for you. Too often, owners choose an inappropriate business, but by following certain guidelines you can minimize the chance of a poor selection.

Firstly, identify your existing skills and experience. It is usually far easier to successfully run a business which complements your knowledge and interests, rather than to learn everything from scratch. You should also take into account your personality and hobbies, as you want to buy a business which you enjoy. Recognize who you want to work with and communicate with – if you prefer not to manage employees, buy a business which can be run by you only. Also be aware of whether you would prefer to manage a service orientated or inventory based business.

You must also decide what type of business suits your lifestyle, in regards to commuting and time available. Some businesses may involve frequent travelling or a significant commute every day. However if you prefer, or are limited to staying at home, it is advisable to buy an online business. Due to advances in technology and communications, it is certainly possible to run a business in geographical areas other than your own. How much time you have available also dictates what is suitable for you – if you are interested in a certain business, be sure to investigate how many hours per week are necessary to run it.

Everyone has a varying tolerance of risk, and you must identify how much risk you are comfortable with, both financially and personally. Purchasing a struggling business and turning it around can be very financially rewarding, but also carries a high risk. Alternately, buying an established and proven business is a less risky choice, but may not yield any more than it is currently making. Generally it is recognized that buying a franchise is one of the least risky options, and best suited to those with limited experience and a low risk tolerance.

Finally, assess your current financial situation and goals. If you are looking to buy a business that will generate a large income, be prepared to potentially spend a large amount to purchase it. However if you are looking for supplementary income, a smaller, low-priced business may be ideal. Ensure you consult with an experienced professional before committing to any purchase.

Ultimately, you should purchase a business that matches your needs. By following the aforementioned steps, you should be prepared to purchase a business that is appropriate for you. In the end, you want your business to be one that you actively want to be involved in, and that you can grow and profit from.

Preparing a Small Business for Sale

Adequately preparing your small business for sale is crucial – for both ease of sale and maximum profitability. A prospective buyer will naturally be wary of taking on the huge financial and personal responsibility that comes with the purchase of a business, so you must ensure that your business is unproblematic to turn over into new hands. By adhering to the following steps, you can make the preparation for the sale as efficient and effective as possible.

One of the most vital steps is to allow ample time to prepare for the sale – a year is preferable.  This gives you time to tie up all loose ends, and get your financial statements and other paperwork in order. A potential buyer will want to thoroughly inspect all of your financial records and projections, so you must ensure that these are comprehensive and up to date.  Document all business agreements and relationships, such as those with suppliers and local government departments - unwritten or ‘handshake’ agreements are not guaranteed to survive the sale. Also attempt to settle any outstanding debts, whether they belong to the business or customers with unpaid accounts. Any leases on real estate and equipment should also be renegotiated or renewed.

Creating a complete inventory of all stock and physically cleaning up your business are also key steps in preparation. Having a full record of all stock not only looks appealing in your financial records, but will also benefit the new owner of the business. If your business has a physical location, take a moment to look around your premises through the eyes of a potential buyer. Eliminate any unnecessary clutter, repaint where required, and make certain that everything is in a state of good repair and cleanliness.

Ensure that your current employees’ interests are met, so that good employees are retained through the sale process. Loyal and effective employees are essential to a business, and prospective buyers will be positively influenced if they know employees will stay with the business. Experienced employees will help to make the ownership change a smoother transition, and therefore make your business more attractive to buyers.

Finally, do not be afraid to seek the help of an experienced business broker at any time during the preparation and sale process. Such an individual can greatly aid the final sale, and also assist you with many aspects of the sale preparation. By following these steps and allowing yourself sufficient time, preparing your small business for sale can be a straightforward and ultimately profitable endeavor.