How do you Choose the Best Business for Sale?
- Written by Vanessa Lovie - Bsale CEO
When the time comes to buy a business you will be presented with thousands of opportunities on websites like Bsale. Making the right decision for you and your family is important. Every business owner will tell you the amount of hard work and commitment that goes into starting and building a business. So when buying a business for sale, you need to make sure you are prepared.
5 tips for choosing the best business:
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Review the Owners Working Hours.
Welcome to 2021 where working from home and remote work has become more common. When your buying a business you want to know the level of commitment, you as the owner will be expected to input. Are you buying a business with minimal hours such as 4 hours a day, or are you committing to 60-70 hour work weeks? It’s important to assess the hours the owner will be working, and whether this aligns with your work/lifestyle balance and is it really the best business for you.
The owner's working hours should also be evaluated during the due diligence. You want to make sure you are paying a fair price for the business and factoring in the hours the owner invests in the business. If the owner is working 80 hours a week but is taking a $70,000 wage - is this really a good valuation?
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Check the Location
This can be looked at from a number of different angles. The location of the business in proximity to your home is important if you will be commuting regularly to work. You will need to factor in this cost and time. The location of the business in terms of generating income is also important. If you are buying a cafe, foot traffic is extremely important. When choosing to buy a business you need to make sure the location is right for your business. Its also important to consider the lease agreement. If a lease is nearly expiring on a business, then it may make a business for sale a lot less valuable. The lease is an important part of any business purchase. Most listings won't display specific location details due to confidentiality reasons, so you will need to contact the seller directly via Bsale to find more information.
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ROI
There is no point in buying a business unless you know your ROI (return on investment). How long will it take to repay the costs associated with buying the business before it even turns a profit. When business appraisals are made they are usually based on a factor of 1-3x of the net profit to owner. So if the ROI is at 3x net profit, you could be looking at 3 years to get your money back (let alone any additional costs such as stock or equipment), if the income and expenses remain constant. Sometimes the appraisal will factor in goodwill, but it is less common these days. Every business is important which is why it’s important when conducting due diligence you receive professional assistance.
4. Council Developments
You need to know what is happening in the area. Is a new shopping centre opening, is a new road being built, is a major fast-food chain coming to the area. It’s important to know what’s happening in the local area and how it could impact on sales. The seller may be aware of some major changes so is selling before they may have any effect on the business. So be sure to visit the local council to see what plans are submitted. Talk to local business owners and see if they know of any developments.
5. Understand your Skills
Owning a business requires you to have multiple skills from handling cashflow, to managing employees, to marketing, sales and so on. You need to have a solid understanding of your skillset and where you can apply them. Is it wise to buy a cafe if you have never made a cup of coffee before? Would you buy a dog wash business if you have never owned a dog or dealt with clients. You need to be confident in your business skills and what you bring to the table.
At the end of the day buying the best business will depend on you and how well you assess the business for sale. Every business is different which is why full due diligence needs to be performed. Assessing the business, assessing your skills, assessing what you can achieve by owning the business are good places to start.
Vanessa Lovie - Bsale CEO
Vanessa is the CEO of Bsale Australia which is a leading business for sale website since 2000. Passionate about small businesses and hearing the owners journey, Vanessa is inspired daily by the amazing businesses that have been created in Australia. Buying a business is exciting, we love to guide people in the right direction to find opportunities.
