As a result of the shutdown of Nashville’s economy, many small business owners feel it is now time to throw in the towel and start fresh somewhere else. In particular, baby boomers who have been considering getting out of the game even before the pandemic may want out now more than ever.
If you think you have what it takes to keep a small business going and give it new life, especially after the pandemic, don’t hesitate to consult a CPA to get crucial financial advice and guidance on your next steps. Keep in mind that any investment involves risk. To minimize that risk, it’s important to work with a financial professional.
Buying an existing business gives you the advantage of not having to start from scratch. All you need is to improve the business and shape it into your very own. You might even receive training from the business owner, or have carryover employees who already know the business inside and out. These are things that can help you hit the ground running instead of groping your way through uncertainty.
Here are the basic steps in acquiring a small business:
1. Know the type of business you want to acquire
It’s always best to be in a business that ties in with your personal interests, skills, and experience. The passion for what you do can motivate you to keep going even through difficult moments.
2. Look for motivated sellers
Motivated sellers are more open to negotiations than those who are less inclined to sell. This alone can help you save a substantial amount. Search for sellers in social media and your network, or through a business broker or platforms and websites dedicated to businesses for sale.
3. Understand why the business is being sold
The owner’s reason for selling can be something as simple as wanting to retire, or it can be more complex and difficult to hurdle, such as a limited market for the product or service, huge debts, low-quality inventory, and so on. Understand the business’s challenges, successes, competition, and opportunities, and seek advice from your CPA and other experts if it can be a profitable venture for you.
4. Find financing for the business
In addition to your personal funds, your financing options include gifts from friends or relatives, a loan from a bank or lender, and investor financing. The owner might also be open to an arrangement where you put down a down payment and pay the balance through a percentage of the business’s profits. There are banks and lenders that are willing to finance a business purchase with the business as collateral. You may also find financing from government sources, such as an SBA 7(a) loan.
5. Do your due diligence
Due diligence is very important in acquiring a business. Once again, you need to enlist the help of your CPA and perhaps a lawyer. It’s important to understand the business inside and out, and make sure everything you agreed with the seller is accounted for. Your CPA can help you go through the business’s financials, organization, assets and liabilities, existing contracts and leases, and so on. What you find in your due diligence can factor in your decision as to whether or not you should go through with the purchase.
Through the entire process, your CPA is your ally in ironing out the kinks and making sure you are entering a worthwhile endeavor.
7 Steps to Acquiring a Small Business, Entreprenuer.com
How to Buy an Existing Business, JustBusiness.com