Buy an existing business or franchise

Buying an existing business is exactly what it sounds like. The buyer typically takes over full ownership of the business. The largest advantage is having an existing blueprint that can include important factors like an established customer base, defined operating expenses, and fully trained employees. Regardless of business type, almost any kind of business could be bought or sold. When you buy an existing business, you typically get complete control over its direction. However, with no set vision, infrastructure, or external guidance, your business could struggle as you figure out the best way to run things.

Consider 3 factors before franchising or buying a business

Though the business models differ, there are three common steps to take that will help you determine whether you should franchise or buy a business.

• Quantify your investment: Review your financial landscape and decide how much you’re willing to spend to purchase and ultimately manage the business. This will help you determine what type of businesses or brands are best for your budget.
• Consider your talents and lifestyle: Be honest about your skills and experience, as they can help you eliminate unrealistic business ventures. For example, if you prefer hands-on assistance, then franchising might be best for you. On the contrary, if you’re an experienced business owner, you may want to consider buying an existing business.
• Review the full landscape: Look at the existing infrastructure and make sure you understand everything that comes along with the purchase. Don’t be afraid to ask questions about contracts, leases, existing cash flow, and inventory. The more you know, the better equipped you’ll be to make a sound decision.

Quantify your investment.

Consider your talent and life.

Review the full landscape.

Pick the right franchise or existing business for you

Once you know whether you want to franchise or buy a business, you’ll need to evaluate each specific opportunity. In short, it boils down to this: do your due diligence. Your research should help you understand the business from both a financial standpoint and in the overall landscape. If you’re interested in franchising, you should explore the following:

• Any and all existing reports: Now is the time to put your detective hat on.
• Associated rules and regulations: Every franchise is different. Confirm that you’ll have the right to use the franchise name, trademark, and do business in an area protected from other franchisees. You can also find out if you’ll get training and management help from the franchisor, and be able to use the franchisor’s expertise in marketing and advertising.
• Contracts: The contract between the two parties usually benefits the franchisor more than the franchisee. The franchisee generally needs to meet sales quotas and buy equipment, supplies, and inventory. Make sure you understand it all before signing.

Get ready to buy your franchise or business

Once you’ve found a franchise or business to buy, it’s important to conduct a thorough, objective investigation. At this stage, you’ll probably want professional help. Consider hiring an attorney and an accountant. The tax rules surrounding franchises in particular are often complex. A specialist in franchise law can assist you with evaluating the franchise package and tax considerations. An accountant can help you determine the full costs of purchasing and operating the business, and even help estimate potential profit.

An attorney and an accountant together can help you create and evaluate important documents. Typically that includes:

• Letter of intent, Confidentiality agreement, Contracts and leases, Financial statements, Tax returns, Sales agreement, Purchase price adjustment