Buying a Business? Consider These 5 Characteristics
Let Transworld Business Advisors help you make sense of the volume of businesses for sale in Colorado, and identify the right investment opportunity for you.
Buying a business for sale is a great path to business ownership that insulates you from some of the risk starting up a business entails. But once you’ve made the decision to buy a business, how do you evaluate that business for purchase to ensure it is a sound decision. There are a few characteristics an entrepreneur can evaluate to choose a business acquisition. This article will outline five, but we also recommend working a licensed business broker who can provide invaluable advice and access to listings.
The Market
One of the many typical reasons we find business owners sell their company, is because they’re in a declining market. If you’re looking for a high growth business opportunity, considering market trends will help you understand what kind of growth you can actually build on. Think about how there have been a number of trendy business models over the years, that are now in decline such as the frozen yogurt business, that may no longer be an opportune investment. If you’re unsure of the market stability in relation to your business, speak with your broker. They have access to market data and sales comps that will provide insight into the market.
Industry Competition
Competition in the industry can play a huge role in how much business you can actually do and how much effort will be required to grow the business. If you’re in a common business model like landscaping, it is important to consider how many landscaping businesses operate in a similar area, and what differentiates your company from the rest.
Business Reputation
A business’s reputation is a huge factor for today’s entrepreneurs with customer’s ease of access to the Internet. It can be very difficult to overcome poor reviews on websites like Google or Facebook. Reviewing what customers are currently saying about a company will also give big insight into how well the company is doing overall and if there are any interesting opportunities for improvement or to add value.
Business Size
The size of the business for sale is an important factor to consider. If you’ve never been a business owner before, buying a large scale operation, may not be the appropriate course for you. But if you already have experience, diving right in to a good size business may be just fine. Consider what you’re looking to achieve as a business owner and the role you would like to fill, keeping in mind the larger the company the more complex operations can be and the larger the cash flow reserves that will be required.
Customer Base
One of the great aspects of buying an established business is that they often have built in cash flow and customer base. However, it is still important to consider the size of the customer base. Maybe you are buying a home based business that you are considering relocating. Will the current customer base be able to support the transition until you can focus on marketing again to a new customer base? Or if your business acquisition is meant to help you build wealth, it is important to consider the size of the customer base to understand the true opportunity available to the business.
Is the Business Worth the Investment?
Now that you’ve considered these 5 characteristics of a business to buy, you can start to get a better understanding of whether a business is worth the investment. And at this point in the process, you can sign a non-disclosure agreement to receive more insight into the financials of the business and take an even deeper dive into the investment opportunity.
If you’re ready to buy a business, we invite you to speak with a business broker to discuss your goals and get started on the business search process. For more information, schedule a free consultation or visit our website for more information.
Rachael Holstein has been the Marketing Manager for Transworld - Rocky Mountain since 2016. Her work experience has been largely focused on business development and marketing in business brokerage, finance, architecture, property management, and information technology. A long time resident of Cleveland, Ohio, she attained her undergrad from John Carroll University and her Master’s Degree from Cleveland State University. In 2013, she relocated to Denver with her husband, Joe, and her furry companions to explore the mile high lifestyle!
