How to Find and Buy a Business: A Step-by-Step Guide to Ownership

So, You Wanna Be Your Own Boss? Buying a Business Might Just Be Your Golden Ticket (Without the Startup Sweat)

Starting a business from scratch is a challenge. However, it can feel like a marathon in flip-flops. Have you considered buying a business instead? You might find it easier to buy one that’s already operating. You can skip the startup grind and enjoy established customers, revenue, and maybe even coffee.

Finding Your Diamond in the Rough: Where to Look for a Business to Buy

Start Your Treasure Hunt Locally

Looking for a business to buy takes effort. It’s not like ordering pizza. Start locally by doing some light internet searching and making a call or two. Walk around your neighborhood, and look for opportunities.

• Pick up the phone: Cold calling local businesses can work. If you’re pleasant and informal, ask if they’ve ever thought of selling. You may uncover some hidden gems.
• Business Brokers: Your Secret Weapon: Think of brokers as linkers between buyers and sellers. Business brokers are there to assist you in finding businesses for sale. They can save you time and simplify your search.
• The Internet is Your Oyster: Enjoy searching for small-business-for-sale websites. Check them out. Discover what’s available in the online business landscape.
• Spread the Word: Inform your network that you’re seeking to buy a business. Sometimes, opportunities arise from unexpected connections. Use ads or social media posts to announce your hunt.

Online Gold Mines: Directories and More

The internet is a vast resource filled with directories. It’s where you can find local businesses ready for acquisition.

• Online Directories: Websites like Yelp, Google My Business, and online yellow pages remain useful. They guide you to potential businesses nearby. Local directories can be valuable.
• Visa’s Helping Hand: Check out Visa’s directory. They now feature an online list of independent local businesses for sale.

Listen to the Town’s Whisper: Identifying Opportunities

Want to find needed businesses for sale? Be observant in your community. Learn what your town is missing.

• Become a Survey Superhero: Utilize surveys and social media polls. Ask locals what they want more of. Discover what they feel is lacking.
• Attend Town Hall Meetings: Go to town hall meetings. Observe what services successful businesses offer. Identify gaps in the market by listening to community needs.
• Local Social Media Groups: Join local social media groups. These platforms show what people want or complain about. Opportunities often hide in these online discussions.
• Community Events: Attend community events. They help you observe local preferences. You might notice thriving vendors that spark your next business idea.

Need a Guide? Consider a Business Broker

If you feel lost, think about hiring a business broker. They assist prospective buyers in navigating sales. They connect you with sellers and streamline the process. Brokers guide you like a business GPS.

Is This Gem Real? Evaluating a Business Before You Commit

Due Diligence: Your Detective Work Begins

Due diligence sounds important. It means doing thorough research before buying a business. When spending money on a business, you must examine everything closely.

• Financial Statement Review: Look at past financial statements carefully. They contain valuable information that reveals the firm’s health.

Due diligence safeguards against bad investments. It ensures you’re not purchasing a bad business concealed as a promising one. You want a solid investment, not a disaster.

What’s the Price Tag? Determining Fair Value

How much should you pay for the business? The purchase price varies based on multiple factors, such as financial performance. It’s essential to negotiate this figure carefully between buyer and seller.

Know Thyself (and Thy Business Interests)

Before searching for businesses, ask yourself: “What truly excites me?” Reflect on your passions.

• Identify Your Interests: Know what type of business energizes you. Consider your budget. List skills and experience you can contribute. A love for pizza may lead to owning a pizzeria.
• Research the Industry: Investigate the industry you’re considering. Understand market dynamics, trends, and competition. Knowledge gives you an edge in discussions.
• Develop a Business Plan: Outline your vision and strategies. Prepare financial projections. A coherent plan navigates business challenges effectively.
• Evaluate Potential Businesses: Analyze their financials, assets, and growth potential. Are they making sufficient profits? Investigate their debts and potential for expansion.

If you’re pondering profitable small business ideas, explore American Express’s insights on the 8 most profitable small businesses.

Lendio offers guidance on buying a small business and finding one.

Show Me the Money! Financing Your Business Acquisition

Funding Your Dream: Exploring Financing Options

financing options. Not many people have enough to buy a business outright.

• Personal Funds + SBA Loans: Use personal funds alongside SBA loans. It’s a strategy commonly used by buyers.
• Bank and Credit Union Loans: Approach local banks. Local credit unions may have loan options worth exploring.
• SBA Loans: Uncle Sam to the Rescue:SBA loans offer favorable terms to small businesses. They come in various types, like microloans, 504 loans, and more.
• Seller Financing: Consider seller financing. At times, sellers might assist with part of the payment.
• Account? Creative Financing is Your Friend: You can buy a business with no money upfront. Options include SBA loans with no down payment, seller financing, your 401(k), or home equity. These methods are complex but available.

Down Payment: How Much Skin in the Game?

Down payment. The dreaded D-word. What do you need to pay upfront?

• The 20-25% Rule (Sometimes): For some acquisition loans, expect a down payment of about 20% to 25%. Ouch.
• But Wait, There’s SBA! Lower Down Payments?: Hold up! SBA loans can be lenient. For SBA 7(a) loans under $500,000, there’s often no minimum down payment. Correct.
• Expect to Pay Something (Probably): Generally, have between 10% to 30% of the purchase price ready as a down payment. It varies, so prepare.

SBA 7(a) Loan: Your New Best Friend (Maybe)

SBA loans serve as VIP financing for small businesses, especially the 7(a) loan.

• The SBA 7(a) Loan: What’s the Hype?: This is a financing form partially guaranteed by the U.S. Small Business Administration. The SBA lowers risk for lenders, thus encouraging loans.
• SBA’s Main Squeeze: The 7(a) loan program provides financial assistance to small businesses. It’s their main loan program.
• Flexibility is its Middle Name:SBA loans, particularly the 7(a) loan, are great for small businesses. They offer flexibility, lower interest rates, and longer repayment terms.
• Most Popular Kid on the Block:SBA loans are the most popular loan type for small businesses. Everyone wants one.

Sealing the Deal: Making It Officially Yours

Negotiate Like a Pro

Negotiate and Finalize the Purchase Agreement. Put on your poker face and consult legal counsel. Ensure the purchase agreement is airtight, fair, and protective as armor in battle. You want your interests covered. Don’t battle alone – bring legal help.

Crossing the Finish Line: Finalizing the Transaction

Complete the Transaction. Close the deal. Pop some drinks. Take ownership. You’re now the boss. Congratulations, business-buying ninja!

Before You Sign on the Dotted Line: Key Things to Remember

Due Diligence: Double Down on Your Research

We stress this: due diligence is crucial. It’s a safety net, your insurance, your out-of-jail card. Due diligence protects you when buying a business. It’s a vital step in this process to avoid purchasing a lemon. Do it like your financial future rests on it – because it does.

Buy, Don’t Build: The Perks of Existing Businesses

Why buy instead of build? Glad you asked! Lutz M&A Insights highlights pros and cons of buying an existing business. Buying is far less risky than starting from scratch. Why? It already has goodwill, operates, has clients, employees, systems, suppliers, financial history, and locations. You might even get the seller to finance.

LLC: Your Business Shield

You need an LLC? Do you want personal liability protection? An LLC (limited liability company) provides that and a business structure. You can also use a corporation for similar protection. Technically, you can start a business without formal structure, but that is risky.

Bonus Round: SBA Loan Must-Haves

If considering an SBA loan, remember:

• Size Matters (to the SBA):The business must meet the SBA size requirements. They focus on small businesses.
• Credit Score Check:The business must hold decent credit. A good credit history is required to obtain an SBA loan.
• Repayment Reality Check:The business must show ability to repay. Makes sense. The SBA does not want poor investments.

Buying a business isn’t easy. It can, however, be a smart move. Do your research, sort your finances, and you could own your business empire (or a local shop, your choice).