3 Things to know when Searching for a Business to Buy

Written by: Patrick Findaro
Last Updated by Rocío Torres: August 15, 2022
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Buying a business takes special care and cannot be made in the heat of the moment. A potential buyer may have some ideas as to what type of business in a certain industry they would like to purchase. Most businesses are sold confidentially through business brokers. For this reason, it may be in the buyer’s best interest to locate a local business broker. In states like Florida, buyers are often represented by business brokers who have access to thousands of listings through the MLS. However, most states do not have a listing portal exclusively for brokers and they will often leverage business marketplaces like Vetted Biz. There are three primary questions that must be addressed before the business buying process should begin.

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1. The Business in Focus

Buyers should look into businesses that interest them and is important to them. Otherwise, then it may not suit them in the end.

Experience in a particular business is also useful to have. If you have experience in a certain industry (e.g. healthcare or real estate), you have the potential to grow and control/manage that growth over the long term. It is also important to see if you fit culturally into the new business.

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2. The Top Line of Financial Statements

When you are preparing to purchase a business, pay close attention to the gross sales when reviewing the financials. Because then you will be able to understand the potential profits the business is able to generate. The financials of most businesses are prepared by trained accountants who seek ways to legally minimize taxes. Business owners generally earn approximately 10 to 20 percent of the business total gross sales.

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3. Your Action Plan

While it is important to observe what the current owner of the business is doing and what he has done in the past, it is much more important to focus on what you will be able to accomplish after ownership has changed hands.

There are several questions that should be asked when looking at purchasing a business, such as potential improvements to the business, scalability, and management when there is a change in ownership.

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Weighing in on the Decision-Making process

We would buy a business because we would like to increase personal earning potential in the future, since 70 percent should be focused on business improvements and 30 percent on established business activity. We should focus more on the future earnings than the current business value.

While searching for business possibilities that you could potentially run someday may be exciting, it is better to search for those businesses that are a better fit for you and fit your future goals. Once you have found such a company, then review its financials with an accountant.

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