What to Look for When Buying a Small Business

Purchasing a small business can be a rewarding, albeit difficult, endeavor. While there may be hurdles along the way to buying a small business, it is still a more secure investment than trying to start your own business from scratch. With an already existing business, you already have equipment and inventory. You may also have dedicated employees already in place that you would want to stay on after you purchase the business. There is also the chance of already having an established customer base. These are all things that can take time and resource to secure, but may already be firmly in place.

Before making a major purchase like buying a small business, you will want to take a closer look at some things that could have a significant impact on its future success. For instance, you will want to look at:

  • The business’s reputation among locals: What does the community think about the business? Does it have a good reputation? Have people ever made complaints against the owner? Is the business active in the community? You are not just buying a business; you are buying its reputation. Go out into the community and talk to locals about what they think of the business as it currently stands.
  • Community demographics and political climate: How is the surrounding community doing? Are businesses closing or thriving? What type of businesses are succeeding? Are there any major plans to change local zoning laws? All of these things can have a big impact on your business.
  • Competitors: Where is the nearest big competitor? Are there any big company competitors nearby? Are any big company competitors planning to move to the area in the foreseeable future? Know what you may be up against. Big companies are tough to compete with even under the best of circumstances.
  • Discretionary income of current owner: This is a big one. What is the current business owner walking away with after he or she pays all necessary business expenses? What the current owner’s income could be your income if you purchase the business. Could you get by with what they are making? If the current owner is selling because he or she has not been able to generate enough discretionary income to live off of, you will definitely need to rethink your purchase plan.

Doing your due diligence prior to the purchase of a small business will require some digging. It will require some investigation. Remember that this is a major purchase. It is a life-altering purchase. Putting some serious work on the front end to make sure buying the small business will be a wise investment will be worth it. While finding out this information still does not guarantee the success of the business should you choose to purchase it, it will greatly increase your chances of success when you know what you are getting into. If you are considering the purchase of a small business, a knowledgeable attorney can help guide you through the process. Contact Fairfax Law Firm today.