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Steps for buying a small business

contract30901439.jpgYou may want to become a small business owner, but you may not want to go through the difficult process of starting and maintaining your own small business. This doesn't mean that your dreams of small business ownership are over. Buying an existing small business can be a great way to have the freedom of running your own business, without the pain of having to the business up and running. You should keep in mind that while buying an existing small business will most likely be a more expensive proposition, then starting a small business, there are certain advantages that you should be aware of. For most people determining whether any particular small business is going to be a good investment can be one of the most difficult parts of the process. However, if you have a plan, and take the time to do the appropriate research, you can be fairly sure that you can find the right answer. Here are the steps for buying a small business-

  • Choose a small business that you are interested in and qualified to run-While there is a learning curve when you open your own small business, you must be passionate and knowledgeable about the business you want to buy. There won't be time for you to completely learn a business from the ground up, when the business is already existing. You must choose a business that you are at least moderately qualified to run. The bottom line is that it will take more then desire to be a small business owner, you will experience and a certain skill set in order to make an existing small business even more successful. Then once you have determined the area you are interested and experienced in, you can begin looking at what small businesses are for sale. Now is the time to be looking at if any of the small businesses you are interested in have the potential to be even more successful, or if they will simply be a drain on your wallet.
  • Check out the business you are looking at thoroughly and carefully-The first things that you should do is ask the current small business owner, for their business plan. Since the business plan functions as a blueprint for the business, that can tell you a lot. You should be able to determine from the business plan, whether or not the business is on track and what the potential is. If you are interested in buying a small business, and then find out they don't have a business plan, this is a red flag to move on. After checking out the business plan, you want to look at all of the financials of the small business. You should be able to see an even clearer picture of the potential of the small business, by looking at these documents. While some small business owners are hesitant about sharing financial information (even if they are selling), a complete refusal to show financial information, is usually a sign that a business is not doing well. You should then proceed with caution.
  • Take the time to do some research-This is a life changing investment that should not be done until you are completely comfortable that you have enough information. Remember that you are trying to determine if the business is actually worth the asking price. You should look at several different factors that include but are not limited to:
  1. How many assets does the business have and what is their value?
  2. How much debt is the business carrying?
  3. What are the most profitable streams of income for the business?
  4. How much risk does the business have?
  5. What is the competition like for that particular small business?
  6. Is the overall market for the small business, growing or declining?
Finally, once you have determined that the small business is worth the asking price, then you should involve professionals to make sure that the sale is done legally, and there are no lasting complications.
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