During the past year, high unemployment levels have left many skilled individuals looking for work. But with corporate jobs scarcer and less secure, more people are skipping the job hunt in favor of buying a small business.
Tough economic times have spurred many owners to put their businesses on the block, so buyers currently have access to a large number of healthy and distressed businesses. But anyone considering buying a business should give the idea full consideration before making the leap.
Buying a business requires a dedicated effort similar to a job search. Before starting the process, it is important to know your core competencies, capital resources, risk profile, financing options and industries of interest.
To find the right business for you, consider these steps:
1. Complete a lending profile.
This will reveal your credit worthiness, the amount of working capital the business will require, and your cash flow needs. By completing this early in the process, you can choose a business within your means.
2. Take a personal inventory or assessment.
An assessment can help determine whether your personality is suited for business ownership, what type of business would best match your skills and experiences, and the type of company structure you should look for. Online assessments are available to help determine your strengths and weaknesses.
3. Consider the size of business.
A small business can range from one to 500 employees, depending on industry, so potential business owners will want to make sure they buy a company they feel comfortable managing.
4. Create a list of lifestyle needs.
If you hate to be on the road, a regional or national distribution business might not be right for you. Similarly, if you want to be able to work from home, recognize that in your search. Buying a business gives you the opportunity to step into a career that fits your lifestyle, but you need to be honest about what’s important to you.
5. Begin the due diligence process.
A thorough due diligence process takes weeks or months, but it allows you to fully understand the company you are considering buying as well as the market it serves. You’ll want to examine competitors’ products or services and look at who the customers are likely to be.
6. Consider a partner.
To determine whether you’ll benefit from a partner, look at your lending profile and personality assessment. A partner can double the available funds and provide additional support, but you’ll want to make sure any potential business partners share your vision and operational approach.
Buying a business is one of the best ways to merge your personal interests and professional strengths. Finding the right business to buy is hard work, but can be well worth the effort.
Domenic Rinaldi is president and managing partner of Chicagoland Sunbelt, a business brokerage firm that focuses on helping people buy, grow and sell businesses in Chicago and the Midwest.