Buying a business is an exciting alternative to starting from scratch. It lets you skip some of the challenges of building a startup from scratch, like building a customer base or creating a product, and instead jump into a company that’s already up and running. But buying a business involves a lot of careful planning, research, and decision-making to ensure you’re making a sound investment.
In this blog we’ll discuss the basics of buying a business, explain the buying process, and answer some common questions to help you get started.
With over 25 years in the industry of selling businesses, BizBen has extensive experience connecting buyers and sellers, facilitating thousands of business sales. Our platform provides tailored resources, insights, and professional guidance to ensure a smooth transaction process for all parties.
Here are some reasons why buying a business can be more beneficial than starting one from scratch:
When you buy an existing business, you’re stepping into a setup that already works. This means you’ll likely have an existing customer base, trained employees, and an operating system. Compared to starting a business, it can help you turn a profit faster.
A ready-made business often has an established brand and customer recognition, helping you save time, money, and energy on marketing and brand-building efforts. Plus, an existing business usually has cash flow from day one, which is hard to achieve in a brand-new venture.
Buying a business and buying a franchise are similar but come with key differences that impact your control and the level of support you receive.
With a franchise, you’re buying into an established brand with a set business model. Franchises like fast-food restaurants and retail chains provide a name, logo, and operating model to follow. There are two types:
The downside? You have less control and must follow the franchisor’s guidelines.
When you buy an existing business, you gain full control over how it operates. This flexibility allows you to bring your vision to life. However, you won’t have the structured guidance that comes with franchising, so the success of your business depends heavily on your own skills and experience.
With decades of experience in the small to medium-sized business market, BizBen has become a trusted partner for Business Brokers, buyers and sellers, and other adjacent members of the industry. Our expertise, resources, and technology ensure that each transaction is as safe, smooth, and successful as possible.
After being in the industry for many years, here are the steps we’ve come up with when buying a business:
Look for a business in an industry you know or feel comfortable learning about. For instance, if you have a retail background, buying a boutique or store may be a good match.
Find out why the owner is selling the business. Is it due to personal reasons, like retirement, or is the business struggling? Knowing the motivation behind the sale can help you identify any potential challenges you may face.
To ensure the asking price is fair, evaluate the business using one or more valuation methods:
An LOI is a nonbinding agreement that shows you’re serious about buying. This document can secure you the “first right of refusal,” meaning the seller will prioritize your offer.
This is the deep research phase where you review the business’s financials, contracts, legal records, and more to make sure there are no hidden problems. Important areas to investigate include:
There are multiple ways to finance a business purchase, such as SBA loans, bank loans, seller financing, or partnerships. Having a clear financing plan is essential to avoid cash flow problems later.
Once everything checks out, finalize the deal. This involves signing a sales agreement and choosing between an asset or stock purchase, each with different tax implications.
Buying an existing business saves time, gives you an established customer base, and often makes financing easier to secure.
Business brokers, online marketplaces, and BizBen are great resources for finding businesses that are currently up for sale.
An asset purchase lets you buy the business's assets (e.g., equipment, real estate), while a stock purchase means you buy the business entity and assume its assets and liabilities.
It’s highly recommended to hire a lawyer to review legal documents, contracts, and ensure all aspects of the sale are compliant with the law.
Franchise costs vary widely depending on the brand. Some franchises cost a few thousand dollars, while others, like fast-food chains, can require millions.
Though rare, buying a business with no money down is possible if you have a financial partner or negotiate favorable seller financing.
BizBen is a platform that connects buyers and sellers of small to medium-sized businesses, particularly in California. It provides listings and resources for those interested in business ownership.
BizBen doesn’t provide direct financing but can connect buyers with resources and professionals who specialize in financing business purchases.
BizBen takes steps to verify information but always recommends buyers perform their own due diligence or work with a business broker.
Buying a business is a big decision with many factors to consider. By understanding your goals, industry preferences, and financial limits, you can make a more informed choice. Whether you’re leaning towards a franchise for added support or an independent business for more control, careful planning and expert guidance are essential to finding the right fit.
Interested in buying a business or selling a business? See BizBen.com for further options
Contributor:
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Laundry consulting, due diligence, buyer representation: We preview laundries for you and evaluate them. 28 years laundry industry experience: buying, selling, valuing, retooling, analyzing, consulting services for laundry buyers and entrepreneurs in California. Contact us today about our services.
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Cheryl's a restaurant business broker, over 25 years in the bar and restaurant industry coupled with a J.D. Cheryl works tirelessly to create successful strategies and effective negotiations for those who wish to purchase a new or sell an existing bar, restaurant, cafe, or night club. 415-309-2722
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Financing a business purchase, or getting cash for a down payment can take many forms. Hopefully the options listed below will give you some ideas where you can find the money to buy a California business!
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