How to Buy a Business

As business brokers, we are often able to tell how long a buyer has been looking for a business just from the questions they are asking.  To make the most of their search, we recommend that first time buyers do the following:

•  VR is a wonderful place for getting information, whether you are a buyer or a seller.  We encourage buyers to look at both the selling and the buying information to get a well rounded picture of what is involved.
• Look at listings to see the type of information is shown.  At a minimum you will usually see asking price, revenues, cash flow, business description and reason for selling.  Looking at the listings will get you familiar with the lingo often used.
• Now that you have done your initial exploration, sit down with pen and paper and analyze your situation.  What income will you need to be able to meet all of your financial obligations (housing, auto, food, school, utilities, etc,)?  How much money you have to put into buying a business (liquid net worth)?  Some sellers offer financing, but if you will be seeking a bank loan you will still have to come up with 50% to 80% of the asking price yourself (this assumes no real property is part of the deal).
• Decide what you would love doing every day.  Then look for listings that show that type of business.  Now that you know what your financial needs and minimum liquid net worth are, you will be able to see if that type of business you provide you with your desired income based on the amount of money you have available for purchase.
• If not, it might be time to do a search based on the numbers you came up with rather than what you feel you would love doing.  It might open up possibilities that you haven’t considered before, but are still very appealing to you.

Going through this process before starting inquiries will place you in the position of being able to ask the right questions and waste a lot of your time pursuing businesses that are not a good fit.  It will also place you in the position of being able to provide financial information about yourself to sellers (as most will ask you for that information up front).