Owning a business or franchise and being your own boss seems like the ideal way to earn a living. And finding an existing business to purchase can be the most fulfilling, yet challenging experience. Buying an established business or franchise gives you a unique advantage. It has an established brand, market fit, loyal customers and employees, and revenue, giving you a foundation to build from and make your own. The impact with stakeholders is immediate.
However, not all businesses are created equal. There are a wide variety of businesses for sale – from restaurants to manufacturers. While some may be very lucrative, others may be lemons with questionable financials and operations (something not valuable or sellable).
Before you buy a business or franchise, do your preliminary due diligence and see if it’s actually a wise investment. Here are 5 things you should look at before buying an existing business:
1. Verify how well the business is performing and its future potential.
Remember, you’re not buying a business for the present moment; you’re buying it for future opportunities. You need to evaluate the business as a whole. The business should be well-established (at least 2-3 years), with a customer base and verifiable financial documents. Its annual revenue should be trending upward, showing a history of strong financial health and success.
2. Verify the business’s online & social presence.
It’s 2019 people! Social media and a business’s online identity and presence boosts its visibility among potential customers, letting them reach a wide and targeted audience. Online and social presence is super valuable as it plays a massive part in a company’s brand and trust with customers. It also showcases the business’s influence within the community.
3. Verify the business model and the company’s product or service.
Businesses can generate revenue in a variety of ways. An ideal business for sale should have multiple streams of income and not rely on the sale of just one product or service. It’s super important to ensure you find a business model that is self sufficient – meaning it’s not dependent on one leader, one employee, one client, one vendor or one revenue stream.
4. Verify what’s included with the business purchase.
If you’re purchasing a business or franchise, verify what’s included with the purchase. Uncover things such as: whether or not you will have full ownership of all social & digital assets; find out all the tangible and intangible assets included with the purchase (branding, intellectual property, inventory, client lists, contracts, etc). Leave no stone unturned and ensure you aim to find any and all skeletons that may be in the closet.
5. Review the business’s online reputation.
As you’re studying the business, search online for reviews. BuyAndSellABusiness.com does a great job integrating its listings with Yelp Reviews so potential buyers can easily see what customers are saying about the business. If the business has a pattern of poor reviews and unhappy customers or if someone has reported it as a scam, it may not be worth pursuing. On the other hand, if the business has received amazing reviews and recommendations, then it confirms that you should continue pursuing the opportunity.
Buying a business or franchise can be a great investment opportunity. It’s a turnkey operation with proven sales, established products and a customer base, but there can still be risk. Make sure you verify as much information as possible. Moreover, working with a reputable business broker who has experience selling businesses can make the search, selection and due diligence process much smoother and less stressful.
First published under our former name, BizON.
