6 Things to Consider Before You Buy a Business


1. Launch a broad search.

When it comes to types of businesses and industries, there are many options. Experts recommend that the business be related to your experience and skills, since its success will greatly depend on the owner’s knowledge. “It’s important to become familiar with the specific type of skills required to manage each type of business,” says Bob House, general manager of BizBuySell, the main web platform for buying and selling businesses in the U.S.

As far as skills go, do not get confused. “If you like cooking, that doesn’t mean that a restaurant is your type of business. In managing a restaurant, there are many other things that are essential for success, like handling the constant staff turnover,” says Joe Harper, director of the Small Business Development Center of the U.S. Small Business Administration (SBA) in Texas.

BizBuySell.com includes information about the businesses bought and sold every year on the site, their values, the type of industry and other key financial information for the small business market.

2. To buy or to create a new business?

Consider the risks. Launching a business from scratch is riskier than buying an established one. “Statistics show that the likelihood of failing with a start-up business is higher than when buying an established one, and the risk is even lower if you buy a franchise with a proven model for a product or service,” says David McCready, president of Transworld Business Advisors, a business brokerage firm in South Texas. The Transworld Business Advisors website includes a list of tips to find the right business. Every state and territory has a federal agency for economic development that provides counseling, training and financing services to entrepreneurs with various experience levels.

3. The prospects of the business.

Of course, no one wants to buy a business that’s going downhill. For example, says House: “No one today would think of buying a movie rental business, which is a sector that is becoming extinct.”

Before buying the two frozen yogurt stores, Montalvo looked at sales tax reports and cash register reports. “Those don’t lie,” he says. Also, as a real estate expert, Montalvo placed a special emphasis on the location of the business and bought the second yogurt store in a tourist location that is close to a water park. He hopes those two factors provide good prospects for sales growth.