When you run a successful business, it’s often tempting to buy a second business to expand on the success of the first. Before making this big decision, it’s important to realize that each business serves a unique geographic location and set of customers. What works in one area may not work in another area, even when it’s the same company and business model.
Maybe you’re ready to take a risk and expand to another industry altogether. In either situation, it’s important to examine your motives for wanting a second or subsequent business before committing to a purchase.
Why Do You Want to Buy Another Business and Why Does the Owner Want to Sell?
When you don’t understand or explore your own reasons for wanting to invest in another business, running it is much more likely to end in failure. While your reasons are your own, here are some common reasons other business owners consider expansion:
- A desire to eliminate the competition by buying them out.
- Wanting to break into a new industry.
- Reaching customers in a new location or with a new product or service.
- As a complement to a current business.
If you’re considering buying a business that already exists, it’s equally important to determine why the owner wants to sell it. It could be as something as simple as wanting to retire or continuing to work but not in a management capacity. However, if the business is in bad shape and about to go under, it’s important to know that too.
How to Buy an Existing Business
Well before you approach a seller to purchase business, you need to decide what the business must have in order for you to follow through with a sale. One of the most basic things to consider is the location of the new business. If that works well for you, consider the following as well:
Do you have experience working in the industry or is it entirely new to you? If the latter, be sure to spend significant time researching the industry and the best ways to manage a business within it.
How well would owning the existing business fit with your lifestyle? For example, would it require you to be on call 24/7 or can you close evenings and weekends and forget about it?
Are you looking for a small business that you basically operate on your own or would you prefer to get in on a multi-million dollar opportunity? Most people fall somewhere in between when determining the ideal size of their new business.
Once you’re ready to move forward with an offer for a second business, working with KGBV Advisors can make the process much more efficient. We will assist you with obtaining a business valuation, completing your due diligence, making an offer, and several other tasks. Please contact us at your convenience to learn more.