Metro Brokers Blog

You may be wondering if 2012 will be a good year to purchase a small business. Can small businesses generate profit in a difficult economy? These are fair concerns and certainly require the small business buyer to move forward with adequate caution. If you’re determined to own a business, you can find what you’re looking for by establishing specific search parameters and purchase criteria. 

1. Research Well Performing Businesses

First, complete the necessary research to identify a short list of business types that perform well in a weak economy. Determine if franchise opportunities provide a greater chance of success. Franchises historically have a higher start-up success rate and give you a proven business system, training and name recognition. You’ll have to decide if you want to start a business from the ground up or purchase an established business. The established business will cost more however, you get to avoid the painful start-up period and you can see current and past performance.

2. Interview Business Brokers

Once you’ve identified some targets, you can then interview business brokers. Hiring a professional business broker will provide several advantages. The business broker will ask important questions about your background and your interests. He/she will represent you during all phases of the purchase process. Your ability to effectively negotiate with sellers will be enhanced by working with a business broker. When you interview brokers, be sure to get references and prove to yourself that he/she has all of the necessary skills and experience to guide you to a closing table. Remember; it’s not the job of the business broker to sell you a business but rather to help you find the right business opportunity.

3. Prepare Questions and Visit the Facility

When you find a business that looks good, you’ll schedule a visit with the seller and see the facility. Make sure you prepare questions in writing prior to the visit and get the seller to answer them. How does the business get customers? How is the work completed? How many hours each week does the seller work in the business? How much competition within a five mile radius? How much employee turnover? How much technical knowledge is required? Ask enough questions to fully understand the nature and scope of the business.

4. Request Financial Information

If your visit goes well, you’ll want to request business financial information. You should look at income statements, balance sheets and tax returns for the current year as well as up to three years prior. Remember: The tax returns are the most critical financial documents. Lenders believe what they see on the tax returns since income statements and balance sheets can be manipulated.

You have to take emotion out of your decision making and rely on correct analysis. When the right business opportunity is in front of you, it will stand the test of your scrutiny. If at any point in time during the due diligence phase you find yourself feeling uneasy, turn and run like a scalded dog. There will be other opportunities to consider.

See my next blog post for the final steps in the purchase process. In the meantime, what businesses do you believe would be good investments?

Tags: atlanta, atlanta real estate, Better Homes and Gardens Real Estate Metro Brokers, business, business brokerage, business buyer, Buyers, Commercial Real Estate, Dan Hinson, georgia, Metro Brokers, Real Estate, small business, success, Tips

This entry was posted on January 17, 2012 at 10:49 am and is filed under Agents, Buyers. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.