Buying a business may mean a lot of the ground work is done already, but investing in an established business certainly does not guarantee instant success. Buying a business comes with many factors to weigh to make sure it is the right option for you.
There are many pros and cons to buying an existing business in general. The business will likely already have a client base and employees, which drastically reduces your startup costs. It may also have a brand, mission, business concept and strategies all figured out already—but these factors could be a positive or a negative as an established business will have a higher purchase price. There could also be less visible problems (like debts the business is owed that you may not be able to collect, or unpaid taxes.) You’ll also need to determine the value of the business carefully.
To gain access to the business’s information you must review, you’ll need to first submit a letter of intent, which spells out the proposed price, the terms of the purchase and the conditions for the sale of the business. A confidentiality agreement is also necessary to assure that you will not use the information about the seller’s business for any purpose other than making the decision to buy it. Contracts/leases, tax returns, financial statements, and other important documents all need to be reviewed and thoughtfully considered. Don’t do it alone either; hire an accountant you can trust to go over the business’s financial condition/value, and hire an attorney to go over the legal documents with you.
For more detailed information on how to value a business, see https://www.score.org/resources/value-your-business. Buying an established business to either start or grow your own can be a good move if you know what it is truly worth and pay accordingly.