If you are in the market to buy a small business, it's important to find a business that interests you, fits your lifestyle and lends itself to profitability. Before you begin your search, you must first define your buying criteria and develop a clear picture of what you’re looking for in a business. Be very specific on the type of business you'll even consider. Otherwise, you can waste a lot of time looking at businesses that won’t work for you. Take the following things into consideration when making this life decision:
1. Determine Your Lifestyle Needs
The best business for your best friend may not be the best business for you and your personal lifestyle goals. Do you want this business to be a side-hustle that takes up your evenings or will this business be central to your livelihood?
How much involvement would you like to have in the day-to-day operations? You can be very present in the day-to-day operations as an active investor or choose to be more hands-off as a passive investor by hiring people to run your business.
Will your business be a small “lifestyle” venture that supports your family only or will you grow it into a behemoth empire with an IPO on the horizon? Will this business complement or augment an existing business you own?
There are business models that work well for each type of business and lifestyle objective, so you’ll want to choose one that fits your preference accordingly.
No one can answer these questions but you. Once you are able to pin down your lifestyle preferences, you’ll be in a good place to find the ideal business to purchase.
2. Define Your Skills and Strengths
If you’ll be buying a business, you should know exactly where you will fit into the equation. If you will be enhancing a business you’ll buy, you should know how you’ll do that. You might be excellent at marketing or computer programmer. How could that strength fit into the business you’ll buy?
Let’s say you are looking at a karate gym that has no problem attracting customers and generating revenue, but you notice the owner has a problem with keeping good records or getting repeat business. If either of these business deficiencies is your forte, it may be an opportunity to add value to the business asset.
On the flip side, a business that needs a strong management presence would not be ideal if you’ll be a passive investor or not willing to hire top-notch management personnel. The point here is finding a business where your knowledge and expertise will add value and equity to the business.
3. Determine Your Industry and Target Market
Once you pin down your strengths, you’ll want to research your preferred industry or niche. Certain businesses will thrive under very specific conditions, while others will tank. A fancy pet grooming shop in a working-class community may not be a good fit, just as a pool construction company in a cold-weather climate may not do well.
Understand the likelihood of capturing market share in a given industry based on current market conditions. You’ll also need to research market dynamics (like a changing neighborhood or regulations) along with impacts they could have on your business.
Finally, consider where your strengths and passions lay when choosing an industry. If your passion is growing revenue, a “boring” lampshade manufacturing outfit could do. If you’re looking at buying a rock-climbing gear store without much knowledge or passion, make sure you understand how you’ll remain interested and bring improvement to that business.
4. Select Your Location
These days, you can find a business almost anywhere with the help of technology. However, you’ve got to know the locations where you will be comfortable operating your business. Are you planning to relocate? If not, you’ll likely want something local. If you will be a passive investor or are considering a digital business model, location may not matter much.
Also, the industry you choose may also have a bearing on the location. There are some businesses that do well in some regions, but not so well in others. Take these points into consideration and select your location preferences so your buying criteria is specific enough.
5. Set Your Purchase Price and Terms
After you’ve pinned down all of this criteria, the last (or perhaps the first) determining factor will be purchase price and terms. You could find the perfect business right in line with your lifestyle and location preferences, but if you can’t afford it, none of that will matter. For this reason, you should have an idea of how much business you can afford from the outset.
However, just because a business is more expensive than you’re comfortable with doesn’t mean you can’t buy it. That’s where the terms come in. There are many buying arrangements you can make so that a business deal is feasible for your means.
For example, a business seller may offer seller financing or revenue sharing. There’s also the possibility of getting a bank loan to help with your acquisition.
Overall, you should be aware of both the price and terms that will work for you in the near term and long run.
6. Take Advantage of Technology
Now that you’ve created the picture of the ideal business you’ll buy, it’s time to start your search so you can make your decision on a business purchase sooner than later.
BizBuySell allows you to conduct very specific searches on thousands of businesses for sale. You can use advanced search filters to find listings based on characteristics like price, location, listing age and more.
Not only can BizBuySell help you find the best business to buy, the website is full of resources to help educate you through the process. If you’d like to know more about buying an existing business, check out the BizBuySell Guide to Buying a Small Business for more information.
Next Step: Get the Guide to Buying a Small Business
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