Are You NEW To Buying A Business?

Are you new to buying a business? If so, here are five things to think about to help you get focused. Your answers to each of the five questions will help you begin to identify the type, size and location of the right business for you.

1) Location? Where are you willing to travel to in order to manage and oversee the business. There are businesses for sale everywhere in Michigan. If you plan to be somewhat active in the business, then you will probably want a business within close proximity. So, how far are you willing to go? Location is important if you are new to buying a business.

2) Industry Type? From car washes, to manufacturing, dry cleaning, car repair, warehousing, retail, restaurants etc., there are literally hundreds of situations for you to choose from. What business would you feel most comfortable in? What do you know the most about? You will need to narrow your focus in on an industry type that you know something about or can realistically manage

3) Your Time? How much time are you willing to commit and invest? Think about absentee owner vs. actively managing the business. The answer will narrow your focus further. For instance, if you buy a restaurant, you will be there early and late every day depending on which meals you serve.

4) The Investment? How much money do you have to invest? Most banks, when they loan will want to see an investment on your part of 20% down. So, if you have $50,000 to invest of your own money, you will have the borrowing capacity up to $250,000. So, the amount of money you have available will determine the size of business you can purchase, in terms of dollars.

5) Partners? Some businesses work well with partners, while others do not. If you bring in partners, you will need to think about the degree of involvement that each partner would have and whether they are “active” in the business or not.

These five things are all general guidelines and not hard and fast rules. But they are all considerations if you are new to buying a business. Obviously, there will be exceptions. But, most of the time one if not all will apply. As you think through each of the questions, think also about how your answers to each one overlaps with all the others. Once you have all the answers thought out, attempt to describe for yourself—on paper—what you believe would be the best business situation for you. When that is complete, you are now ready to get in touch with a business intermediary and begin your search.