Marketing Starting a Business

How to find a local business for sale

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There are a few things to consider before investing in a business for sale in your local area. Some are universal and some can be location specific. They can also be divided into pre-purchase research and post-purchase research. Universally, the first thing you need to do when looking into a business for sale is to do thorough research. Otherwise, you might be in a financially weak position in time and will be looking to sell or liquidate.

Luckily, conducting research here is much easier than when you are establishing your own business. Acquiring a businesses for sale in your local area, such as businesses for sale in Houston, will save you time, energy and money, as the legal requirements already have been fulfilled, some level of marketing has been done and there likely is an existing customer base. Most existing business have broken through barriers to entry and should have current financial records. You can relatively easily determine their current position in terms of profitability, loss levels and most other running requirements from rent to personnel salaries. These, if honest, can give you a near-perfect picture of their financial viability at the time of purchase and provide a basis for future projections.

One critical issue is the reason the business is on sale in the first place. For added profitability or to mitigate losses, a business has a lot of options before an actual full sale. They can go public, sell off a bit of equity or be acquired with the owner still retaining a share. Being on sale, in most cases, implies that the current owner cannot keep the business running profitably and there must be a reason for this. These reasons may include but are not limited to competition becoming increasingly fierce, profitability being lower than is manageable or losses being too heavy for the current owner to service them effectively. If you fail to determine this crucial point before making a financial commitment you are taking a relatively big risk. Please note that there might be no ominous reason for sale, and that the owner may simply want to retire or otherwise move on from the business.

Location-specific research for businesses on sale depends on the local business environment. This comprises but is not limited to their laws and regulations, nearby competition, and advantages and disadvantages of operating the area. This can be null and void if you plan to relocate but if you are looking to stay in the same geographical region, then these are vital to the future of your business. There is also the aspect of natural and man-made calamities with businesses in areas prone to natural calamities such as earthquakes or fire being much riskier. Man-made calamities can be things such as low or high tide seasons. This ties in with expenses such as business or personal insurance and the level of risk you as the investor are comfortable with.

Pre-purchase research contains elements of the universal and location specific but comes with an additional personal element. After you identify the business you want to buy, you can take a loan to raise the capital but you must ensure you can service the loan or you can look into your own personal finances and determine whether you can service the business. You also need to determine the term you are looking to own the business. This demands looking into past and speculative future trends so as to determine the viability of the business in the case of a paradigm shift in your target market. You need to determine the composition and attributes of your target market and hence determine the longevity of the product or service you are offering. For example, buying a customized tee shirt business in an area where in five years most of the population will be wearing a new fad is risky and will demand adaptation. Information is power and getting as much of it as you can key.

Post-purchase research can include but is not limited to valuation of the business after the sale. You need to determine if you will be able to sell the business yourself in case anything goes wrong. The second aspect is evolution. Can you go into a complementary line of business with the existing business or is it limited to current operations? How successful can you be without bringing in a partner or selling off equity? This is for long-term projections mostly, but you need to be prepared and decide on what business for sale will fit you best.

Ultimately, when looking into businesses for sale, you need to know yourself and the target market. The more informed your decision, the better!

About the author

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Rupesh singh is freelance writer.

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