Don’t want to start a business? Here’s how to buy an existing one and make it a success
Want to be an entrepreneur but don’t fancy the idea of starting your own business? Here’s how to buy an existing one – and make it a success.
In today’s digital era, there’s never been a better time to become an entrepreneur — whether it’s your first time striking out on your own, or you’re a seasoned business professional.
If you’re thinking of dipping your toe into the entrepreneurial ‘pool’, but the idea of starting a business from scratch feels overwhelming, you might be the perfect candidate for buying up an existing business instead.
With fewer risks and a business model already in place, buying a business could give you the motivational boost you need to succeed on your own. Here’s some advice to help you buy up a business and use it to launch yourself into the exciting world of entrepreneurship.
How to choose a business to buy
Naturally, when you decide to buy a business, it’s important that it fits with your personal skills, interests, and aspirations. Consider what you could bring to a business, and what your ultimate goals are. What is your motivation behind your decision to buy a business?
Before you start looking, consider the following:
- Your own abilities and what you can help the business achieve.
- Your preferred location – or whether you will buy an online business.
- How much capital you’re willing to invest.
- How much you expect to earn and the level of profit required to meet that figure.
- Which business sectors you’re interested in and your level of prior knowledge.
- How much time and commitment you’re willing to give this venture.
How to work out the value of a business
When it comes to parting with your startup capital, you want to ensure you’re getting the best possible deal on the business or website you decide to purchase. It’s crucial to assess the current financial health of the business, as well as its growth potential.
Here are some of the most common ways you can assess the value of a business that’s caught your interest:
- Capitalised earnings – this means figuring out your expected return on investment. You want to be certain that this purchase will return more money than you might make from a standard market investment. If it doesn’t, then potentially it’s a poor deal.
- Tangible assets – this is where you value the business according to its tangible assets, such as equipment and inventory. Just be sure to factor in potential depreciation.
- Intangible assets – alternatively, this method compares the value of intangible assets, such as the business’s brand, which might have taken years of hard work, money and marketing to reach its present level.
- Cash flow – the final method is to look at cash flow, which gives you a sense of the business’s ability to remain profitable and grow in the future.
The benefits of buying an online business
Investing in an online business, such as an ecommerce store, can be a highly cost-effective alternative to buying a traditional offline business – especially since you will need a strong online presence either way.
Being online gives you a potentially global audience, rather than limiting your services to the local area. What’s more, you don’t have to worry about investing in any pricey equipment, staff or office premises – at least, not until the business grows substantially.
The cost of getting started is much less, and if the business you decide on is already attracting traffic and making sales, then you’ll start generating an income right away.
An online business is also inherently scalable. You can add to the existing business, or start building out your brand in other areas, using the same model. And while there is still a hefty time commitment, it’s likely to be less than that required for an offline business, since much of your process can be automated. Browse ecommerce websites for sale using a free marketplace like Exchange, or check out web brokers like Flippa.
Be ready to add value
If you’re ready to go ahead and buy a business, or if you’ve already completed the purchase, then the next step is to consider how you, the new business owner, will add value – even if it’s already thriving. If you didn’t plan on making any changes to the business, perhaps question why you decided to buy it in the first place. This is your chance to do things your way.
Start by brainstorming the different ways you can help the business progress or enter new markets. As a first step, create a 100-day plan for how you will go about transforming the business, including strategies around marketing, financing, and improving your existing service.
Don’t hang around – be ready to execute these plans right away. And always remember to keep an eye on what your competitors are doing. The first few months after a change in ownership are critical to making your presence felt.
Remember, plans can always change. Once you’re in full flow, certain ideas may be thrown out of the window, and other challenges may arise that require a different solution. But you still need something to start you off on your journey.
Taking it all the way
So how to take your newly acquired business and ensure it becomes a success? Here are some key actions to include in your plan:
- Use the internet – it’s an incredible thing. You should always make use digital marketing, regardless of whether or not your business is found online. It does take time and a certain amount of skill to stand out: the key is to create a strong community around your brand. Look at what your competitors are doing and consider how you can incorporate some of their successful strategies in a new or different way.
- Do more for your customers than your competitors will. Competitor research is absolutely key – you should think of your fiercest competitors as your teachers. Learn from them, then ask yourself, how can I be even better than my teachers? Going the extra mile is what builds brands higher and stronger.
- Narrow your horizons – in the world of business, it’s sometimes better to be a specialist than a jack-of-all-trades. If you can narrow your niche and become an expert in it, you can significantly reduce your competition. Being the best in your field makes it harder for others to outdo you.
- Be patient – as your find your feet, it’s important to choose security over growth. You may be ambitious and eager to drive operations to the next level, but it’s important not to run before you can walk. You might just take a tumble. So if you must be the tortoise or the hare – always be the tortoise.