There’s no singular path to entrepreneurship. You could start your own business, open a franchise, or buy an existing small business. Let’s dive into why you’d buy an existing business and how to find businesses for sale. Why Buy A Small Business? Why Buy An Existing Small Business? Entrepreneurship calls to you. You’ve thought more than once, "Why don’t they simply…?” Then you have your aha moment and realize owning a business doesn’t require a completely new idea. A better version of an existing idea or process could work, too. That’s when it's time to decide if you want to start your own business or find an existing business for sale and improve upon its foundation. You might choose to buy an existing business to: Jumpstart the process Purchase assets Gain employees Secure funding 1. Jumpstart The Process Starting your own business means launching from ground zero—setting up your business entity, creating your infrastructure, and maybe even hiring employees. Buying an existing business eliminates many of the initial startup tasks. That allows you to use your knowledge and resources to rev up an existing business, improve processes or products, and experience business success sooner. 2. Purchase Assets Depending on the purchase agreement, buying an existing business could give you instant assets. These might be tangible assets such as equipment and inventory. Or they may be intangible assets like a customer list, a brand, or a company’s reputation. Assets could also include intellectual property such as patents, logos, and website domains. 3. Gain Employees While there’s no guarantee that employees will stay on after an acquisition, buying an existing employer business means you inherit employees. With proper communication and incentives, key employees may choose to stay on after the sale of the company is complete to help you propel the business to its next success. As you review the terms of buying a business, keep an eye out for employee-related items, including existing employee agreements, non-compete clauses, and labor union rules. 4. Secure Funding Financial institutions are inherently risk-averse. Funding business acquisitions, rather than startups, reduces their risk. A purchase of an existing business gives the lender historical information to review—product sales, cash flow, and even the company’s reputation. That can appear less risky than gambling on a startup’s unproven idea or inexperience. How To Find The Best Business To Purchase How Do You Find The Best Small Business To Purchase? Finding the right small business to purchase requires research and planning. At a high level, steps to buy the best small business for you include: Identify what you want Prepare your paperwork Get your professional team on board Research businesses that are for sale Negotiate purchase terms Allocate transition time 1. Identify The Right Type Of Business When you envisioned your future business, the vision matched a dream or two of yours. Now that you are past the “what if” stage, it’s time to identify what type of business you want to own. Take time to take a deep dive into your motivation for buying a company, as well as your strengths, weaknesses, and goals. For example, owning a restaurant would be a terrible fit if one of your goals is to never work another weekend. On the other hand, if you are a foodie who enjoys bringing people together, a restaurant may be a near-perfect business fit for you. Be sure to include answers to questions like: Sole proprietor, employer business, or franchise Desired industry Company size Geographical location Your work/life balance goals 2. Prepare Your Paperwork Buying an existing business requires up-front preparation, including completing preliminary financial tasks and strengthening your professional persona. Just like you’d seek pre-approval before making an offer on a house, you’ll want to show you are capable of buying a business. No business owner wants to start a conversation with a potential buyer who doesn’t have their financial house in order. Take steps to get ready to qualify for a business loan, including building and correcting your personal and business credit scores and gathering the financial documents needed to apply for a loan. Many sellers aren’t simply looking to cash in. They want their company to survive and thrive post-acquisition, perhaps to keep workers employed or preserve a family legacy. This implies you may need to prove you have the experience to run their business successfully. Before you approach potential sellers, update your resume and LinkedIn profile and have your professional references lined up. 3. Get Your Professional Team Onboard Savvy business buyers rely on their professional team throughout this process of buying an existing business. This group includes your attorney, accountant, business mentor, and lending advisor. These folks have done this before and can guide you through the process. 4. Research Businesses For Sale Here comes the fun part—finding a small business for sale. Now that you know the industry you want, what size company you seek, and your price range, you get to go shopping. It’ll take time to find businesses for sale that meet most of your criteria. Once you’ve narrowed down the list of potential candidates, have your professional team help you with the due diligence and business valuation processes. 5. Negotiate Purchase Terms When you’ve found the right business to buy, it’s time to negotiate the terms of purchase. Your professional team can help ensure the purchase agreement covers key topics like price, transfer of assets, and other important legalities. 6. Transition After the sale is finalized, settle in for the transition period. That’ll include collaborating with your employees, establishing a relationship with your new clients, and addressing existing business issues. You can also start to take steps to implement new ideas and accelerate business growth. How To Find Small Businesses For Sale How Do I Find A Small Business For Sale? Perhaps you decided to buy an existing business after it popped up on your radar. But more likely, you’ll have to look for a business that is for sale. You can find businesses for sale via: Business brokers Networks and small business associations Your current employer Directory listings Advertisements 1. Hire A Business Broker A business broker is similar to a real estate agent. They know the ins and outs of which businesses for sale (including which ones are a steal versus a money pit) and understand the nuances of specific industries. You’ll pay a fee to use a business broker, but it can be worth it to avoid surprises during the purchase process. You may have to use a business broker with certain sellers who use intermediaries to protect their identity. Business owners sometimes keep their “for sale” activity secret to avoid provoking anxiety in their suppliers, customers, and employees. 2. Ask Your Network This is the perfect time to tap into your professional network and small business associations. Often, they know what companies are on the market or open to a conversation about selling. 3. Check With Your Employer Depending on your employment situation, perhaps you could buy your current employer’s business. You don’t want to appear to be staging a takeover, so start the conversation by asking what their succession plan is. That could lead to deeper discussion, including your interest in purchasing the business. 4. Directory Listings Internet searches and directory listings such as BizBuySell.com, Bizquest.com, and LoopNet.com are also sources for finding businesses for sale. This option requires a bit more of your time as you’ll have to sift through numerous possibilities to create your short list of businesses to research. 5. Look For Advertisements Businesses still advertise "for-sale" via non-digital methods. This includes handwritten signs in their front window, a mention on their yard sign, or even classified ads in the back of trade magazines. A business owner planning a DIY sale may accept a lower purchase price since business broker fees will be eliminated. How To Find A Small Business Broker How To Find A Small Business Broker Using a business broker to find a business for sale is a smart move. It’s like using an expert auto mechanic on your car. You could probably rotate the tires yourself, but you don’t have the right equipment, and it’s not your bailiwick. Places to find a small business broker include: Business broker associations Your professional network Ask other for-sale businesses An internet search You’ll want to vet your broker to see if they are a good fit for you. Ensure the broker is credible, is experienced with the industries you are interested in, and charges a fair fee. Business Broker Associations Business brokers are like the rest of us. They often belong to professional organizations to stay up to date with industry trends, boost their visibility, and increase networking opportunities. Most business broker associations list their members on their websites. Two well-known business brokers' associations to review are: International Business Brokers Association (IBBA) National Association of Business Brokers (NABB) Your Network Your professional network, including your attorney, your accountant, or your business peers, may be able to recommend a business broker. Don’t forget to check with your local SCORE chapter or small business development centers, too. Ask For Recommendations From For-Sale Businesses Do you know a business for sale that you aren’t targeting for purchase? Ask them if they are using a business broker that they’d recommend. Use the Internet—Again “Google it” applies to finding a business broker, too. Searching for “business broker near me” may yield a surprising number of results to sift through. Finding the best small business to buy takes time but will pay off in dividends down the road. When you are ready to take the leap, remember that Lendio can walk you through the steps to secure a business acquisition loan.