Have you decided to buy a business? Although there are many aspects to consider during a business buy, understanding basic factors of purchasing a business can help you make better decisions moving forward in a business acquisition. We’ve compiled a list of some of the most commonly asked questions when it comes to buying a business:
1. How is a Businesses Selling Price Determined?
Depending on the size and level of establishment of a business, the asking price is determined by combining a business owner’s pre-tax profits, including fringe benefits such as travel and interest, and the value (with depreciation in mind) of equipment and/or vehicles. This number can then be multiplied by either two or three times, depending on the success or opportunity for growth a business contains.
Once a business owner has completed this calculation, a realtor can be contacted to evaluate the real estate value of a location. These numbers can then be taken to a professional business advisor, who can develop a business’s selling value based on this information.
2. How Do I Know I’m Getting the Best Deal Possible?
When you’ve decided to buy a business, you want to ensure that you are paying the best price possible. But the best deal doesn’t necessarily equal the lowest price. A business advisor focuses on the goals of a future business owner and helps them to develop a long-term plan based on the buyer’s needs. When purchasing a business, a buyer should attempt to find a location that fits both their goals and immediate needs, and negotiate a price from there.
3. Who Will Be Involved in the Business Purchase?
During the process of a business buy, a team of professionals from various economic sectors will be involved. These professionals will include attorneys, accountants, and the existing owners of the business being purchased. To ease the process of purchasing a business, you’ll need to be clear about your intentions, to ensure that each member of the professional team is on the same page, and are working towards optimal results. Business advisors, like our team at Transworld, can help coordinate these efforts for you.
4. How Do I Know a Business is the Right Fit for my Skillset?
Knowing the right questions to ask the right individuals is crucial for any business buy. When considering purchasing an existing business, ask the owners what criteria and skills must be met to successfully run the business. Relate their answer to your own skill-set, and work out what factors you’ll need to improve to optimally run and grow the business. If you still have questions regarding whether a business will be a good fit for you as a business owner, speak with a business advisor. They are equipped with the knowledge and insight necessary to deem an individual ready to take on specific responsibilities and to work with you to find the best fit for your skillset.
For more information on breaking down the steps towards business ownership, or to find answers to other questions you may have, download Transworld Business Advisors’ e-book, All-in-One Guide for Buying a Business.