If you have ever wanted to open up your own business, but found yourself with less funding than you need, there is another option you should consider. Taking over an existing business saves you money because you don't have to advertise as hard (people already know about the business), and you don't have to buy the start up furniture and supplies. You will also be able to start earning a profit right away where most start up businesses don't see a profit until their second year. Here is how you can take over an existing business:
Items you will need
- Optional business broker
- Optional real estate attorney
- Business plan
- Optional business loan
First, you need to find a business that is for sale. Check your local paper first. If you find something that interests you, you can contact the owner for further information. If you can't find anything for sale yourself you can contact a business broker. Business brokers may cost you, but you'll get back that money when the business broker negotiates for you and gets you a better price.
Now that you have found an existing business, you need to get some financing. Your best bet is to contact a bank that you already have a history of using. They will be more likely to approve your loan. It is also easier to get a loan on an existing business than it is to get one to start from scratch. You should also contact the Small Business Administration. They have many loan options available to small business owners.
Develop a plan. See where the current business' strengths and weaknesses are to find out what changes need to be made. Interview the employees and see if they have any fresh ideas since they already know part of the business. Put all these things together and develop a plan of action. Make it as detailed as you possibly can. Once you get started you may need to change a few things around, but making it as detailed as possible means you will end up with fewer surprises.
Ask for a transition period. The transition period can start a few weeks before purchase and extend up to six months after if agreed upon. Asking for a transition period will ensure that you learn all you can from the current owner. The owner will also be there to guide you during the first couple of critical months in case anything goes wrong. The owner will not be liable but will be there for guidance and support. Put the transition period agreement in your legal documents and make sure that it is signed by both parties.
Once the transition period is over and you have fulfilled all the above steps, you can begin to run the business on your own. Now it will become about fine tuning all the hard work you have done to date.
Do your homework before making a purchase on an existing business. You don't want to purchase a business that is running in the negative or that doesn't sell what customers want to buy. A little research will go a long way!
Don't sign any documents without having a real estate attorney review them. Even if you don't use the attorney for the whole process, you can pay a smaller fee to have the attorney review the documents and make suggestions on what should be added or taken away.