Important Questions to Consider When Purchasing a Small Business
When purchasing a small business, you will want to consider the below questions to help you in your search and to get the most out of working with a professional business broker.
1. What type of business are you interested in?
Make sure to focus on businesses that you are interested in. You do not want to spend a lot of time looking at financials and business plans if the business is not something you are going to care about. You will also need to focus on businesses that meet your skills and you have knowledge about. Will the business meet your lifestyle? Are you looking to be a full time on hands business owner or are you looking to be an absentee owner and count on a manager to perform all the daily tasks? All of these are questions you will want to ask yourself to ensure the business you purchase will be successful and prosperous.
2. What financials are most important to review?
When reviewing the company’s financials, you will want to focus on the gross and net sales of the business to see how the business is profiting. You will want to see the last three years of profit and loss statements to see if the sales have been trending up or is the business losing money each year. If a business is not profitable are there simple changes you can make to turn the business around?
3. What can you bring to the business to make it more successful?
When looking at a small business you will need to come up with an action plan on how you can either continue to make the business profitable or what changes can you make to improve the profitability and fuel future growth. Do you need to improve the company’s visibility with more social media or advertising? Can you make changes to the menu to attract new customers? Would you be able to go after bigger accounts to scale the business? What is currently being done that is contributing to the business success and will you be able to continue the process? A good action plan will help you stay on track.
So, remember, choose a business that you are passionate about and have knowledge about. Review the financials and make sure you will be able to continue making a profit or you will be able to make the necessary changes to turn the business around. Create an action plan to help you stay on track with the items you need to review and items you need to change. Purchasing a small business is an exciting and difficult time so make sure to enlist the help and expertise of a professional business broker. They will help you locate the right business, ask the right questions, and guide you through the entire process to make sure you are successful and protected.
If you would like a free valuation in order to find out how much your business is worth, reach out to Trent Lee. He is the #1 “Most Closed Transactions” in the entire country for the First Choice Business Broker franchise.
