If you’re getting serious about joining the entrepreneurial ranks, you’re probably considering launching your own venture or maybe buying a franchise or business opportunity. But have you thought about buying an existing business? According to some business experts, it’s the safest and most effective way to go into business for yourself.
But why should you consider buying a business as opposed to starting your own company, or even buying a franchise? The most important reason is the startup failure rate for all newly launched businesses: It’s high, and if you’re not a risk-taker, this could be a deterrent. The same is true of franchises, especially if you consider that the “turnovers” many franchisors refer to are actually business failures.
So instead of starting from scratch, look for a seasoned small business with three to five years of verifiable financial records and tax returns that coincide with the data on the financial statements. Businesses like these, with a record of growth, trained employees, a good customer base, proper equipment, and an established inventory, are excellent business opportunities. In fact, the failure rates of businesses that have been around for at least five years is quite low.
So what are your chances of finding such a business? Of the five to six million businesses in the United States with 19 or fewer employees, at least 1 million of these are for sale at any given time. According to the 2003 Business Reference Guide (Business Brokerage Press), the average annual revenues of these businesses is $ 412,611-a nice-sized company within reach of many budding entrepreneurs.
If you’re ready to begin your search, here are five ways to find businesses for sale:
- 1. Checking the “Business Opportunities” or “Businesses for Sale” classified section of your newspaper. Local and national papers all have one of these sections in their classified ad area where you can peruse listings of businesses for sale.
- 2. Searching the business opportunity classified Website of The Wall Street Journal. Individuals and business brokers alike can access this site to find businesses for sale all over the nation. Known as BizBuySell.com, it’s probably the biggest online marketplace for business acquisitions of all sizes.
- 3. Finding an experienced business broker in your area who’s a member of the International Business Brokers Association (IBBA). Your chances of finding a broker you can trust are better if they’re a member of the IBBA because this organization has a strong code of ethics that members must adhere to.
- 4. Calling local CPAs to see if they have any clients interested in selling their business. Understand, however, that this is long shot territory and not very time effective.
- 5. Finding businesses you’re interested in and calling on the owners yourself to determine if he or she wishes to sell. Be warned, however: This method exposes you to the eager seller who wants to unload his problem business and has few compunctions against misrepresentation.
If you think that buying a business is an option you want to pursue, your first step is to find an experienced business CPA and an attorney to help in the due diligence process. Hiring these qualified professionals is essential because you’re going to need help evaluating the ongoing viability of an existing business.