Buying a business 

Buying a business can take time, energy and a bit of investigation. It is important that you do your homework to ensure that you buy the right business for you, and that you pay a fair price for it.

Where to find a business to buy

Businesses for sale are often advertised in newspapers, on the Internet, by word of mouth or through trade publications. You may have to investigate a little before buying a business.

Evaluating a business

Before deciding to buy a business, you should evaluate the condition and potential of the business. Think about the following things:

• Is the building, equipment and inventory operational?
• Does the business have a good reputation?
• How visible and easily accessible is the business? Is it located in the city or out of town? You will have to take into account shipping costs that will be necessary, if you are distanced from your suppliers and customers.
• Are the products or services generating revenue? Are sales increasing, decreasing or are they flat?
• Is there a good working relationship with the suppliers and the bank that the business deals with?

If a deal seems too good to be true, it probably is. So, beware! For more information on how to determine what type of business you should buy, read:

• Buying the right business

  Know your options when buying a business. Consider the pros and cons of each business type, situation and stage.

• Franchising

  Learn more about buying a franchise as an option for starting a business.

Determining how much to pay for the business

As a buyer, it all comes down to knowing what you can honestly afford before negotiations start. You should be flexible in your negotiations, but also keep your budget and the value of the business in mind.

What is the value of the business?

• You may want to investigate the value of assets such as the building, equipment and products.
• Other factors to consider are the business' financial statements, annual reports and intellectual property (for example, patents and trade-marks).
• Some valuable assets to any business are its reputation, customer lists, and quality of personnel.

Talk to clients who buy directly from the business. It is better to find out a business' reputation before you sign on the dotted line. Banks are more receptive to a business that has a proven track record.

These articles have good information to help you evaluate the assets and potential of the business, and determine its worth:

• How to evaluate a proposed business acquisition

  What is a fair price to pay for a business? Read this article to learn how to estimate the value of a business.

• Put a price tag on your business: A guide to business valuation

  Before you approach potential investors or buyers, you need to assess the value of your business. Learn about the different ways to calculate this value.

• Know what you are buying

  Protect yourself when buying a business. This article lists the things to do and look into before you sign on the dotted line.

• Value and market your business

  Explore key factors that affect the value of your business and methods you can use to calculate that value. Learn how to find potential new buyers.

Financing your acquisition

You will need money to be able to buy the business and may need some working capital to get things going.

• Grants and financing

  Find out how to access money for your business.

Final considerations

• Take your time and verify all the information you are given before you commit yourself.
• Buy a business in an industry you know well and with products or services you are comfortable selling.
• Buy based on the return on investment and not only the price.
• Don't use all your cash for the purchase.
• Investigate suppliers, clients and the reputation of the business before you buy.

• Buy a business or start your own?

  If you have an entrepreneurial spirit, you may want to investigate the pros and cons of buying an existing business versus starting one from scratch.