Are you dying to start a business–now? Entrepreneurs are impatient by nature, so going through all the steps required to start a business—from writing a business plan to finding a location and applying licenses and permits—can be sheer agony for many.
There are two shortcuts to starting a business that can put you in the driver’s seat fast. Buying an existing business or buying a franchise are easy ways to start a business compared to starting up from scratch. Here’s what you need to know about both of these options.
Startup shortcut #1: Buying an existing business
When you start a business from scratch, you have to do everything from finding a location and identifying suppliers to developing a brand and hiring employees. When you buy an existing business, many of these steps are already handled for you. Another plus: Since an existing business has a track record and assets, it’s often easier to get a loan to buy an existing business than it is to get a loan to start a business from scratch.
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Before you start looking for businesses to buy, identify your skills and interests and what industry you’d like to go into. You can get an idea of the types of businesses for sale by searching on BizBuySell: With 45,000+ listings of businesses for sale at any given time, it will give you plenty of options. Is there a specific business in your community that you’re interested in? Reach out to the owners and see if they are open to the idea of selling—you never know!
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If you want to search for businesses for sale or post a listing for selling your business, check out the BizBuySell platform.
What to ask before you buy a business
Once you’ve identified some potential businesses to buy, do your due diligence to dig up any problems with the business and make sure it’s worth the asking price.
- Find out why the owner is selling. Are they retiring or moving? Or is there a problem with the business (such as a declining customer base or a “cursed” location) that makes them want to unload it?
- What business assets will you be purchasing (such as equipment, real estate or inventory)?
- Who are the key employees? If they are essential to the business, you’ll want to make sure that they will stay with your business after the purchase.
- What type of brand recognition does the business have? Investigate the business’s online reputation, including online reviews, social media and the Better Business Bureau, to see if the business has a positive image.
- Review all the business’s financial information, including bank account statements, receivables/payables, and at least three years’ worth of financial statements and tax returns. Find out if there any outstanding loans, liens or lawsuits.
- Look at existing licenses, permits, contracts, trademarks, and other legal documentation to make sure everything is in order. If there’s intellectual property involved, make sure it is part of the sale.
- Is seller financing available? Making payments to the seller over time can be a more affordable way to pay for a business than taking out a loan.
A business broker can help you find businesses for sale and negotiate a price. This is a complex purchase with several risk factors, so you should also have your accountant review the business’s financials once you get serious, and have an attorney review the contract before you sign.
Startup shortcut #2: Buying a franchise
In a franchise system, a parent company, the franchisor, creates a method for operating a business and sells licenses to franchisees allowing them to start their own location of that business. Franchisees pay a fee to buy into the franchise and use its name, trademarks and systems; they also pay ongoing fees and royalties during the life of their business.