There are several reasons why people buy existing businesses. Many people find it hard to get a business off the ground. Although they are capable of doing business, starting a business from scratch, building and marketing a solid customer base may not be the easiest thing.
Buying a business for sale allows them to own a business without looking for the right customer demographics, getting help with marketing, etc. Many small business owners often start their business journey by buying a business, as they already have a tried and proved business structure and a customer base.
On the other hand, big businesses may buy a business for sale if they are looking to diversify. You might get confused about buying an existing business and buying a franchise. Some might think they are both the same thing; however, it is a wrong idea.
Differences between buying a franchise and buying an existing business
Buying a business for sale and buying a franchise have several differences. One of the primary differences is the control over the business. When you buy a franchise, the franchisor has most of the control over how you run the business, and you have to follow their rules. When you buy a business, you have more control over how you control it and which direction you will lead.
Unless you have a set vision about what you want to do with the business you bought, there is a high chance it will fail since you do not get as much guidance with your business as you might get when you buy a franchise.
How to Buy an Existing Business in Colorado?
Whether you are looking to buy a business for sale in Colorado to start your journey or diversify your portfolio as a business owner, all follow the same steps. It would be best if you did all the necessary research to avoid getting scammed or trapped in some illegal business.
Here is what you could do to buy an existing business:
- Type of business: It goes without saying that with the varied types of business available to buy, you must choose the type you think you will succeed in. You can mostly narrow it down depending upon your experience, passion, skill, interest, etc.
- Find a business to purchase: Once you have determined your niche area, you should look for a business that you can do work with. You will find thousands of businesses available to buy, but you should focus on what would be financially beneficial for you. Profitability is something a business should promise and bring.
- Potentiality: No matter what business you choose, it should have the potential of positive incoming cash, diversity of customers, a long-term growth plan, etc. It should also be an industry that you are familiar with and enjoying building and running your business.
- Places to find a business: Once you have made up your mind to buy a business, you should know where to find a business for sale. There are hundreds of online broker websites containing information about available businesses to buy, or you could approach local business brokers.
If you are looking to diversify your portfolio, you can also look for small businesses that are available for sale in industries that you prefer. Contacting local CPAs and local attorneys are other ways of finding businesses.
- Budgets and goals: Before you start looking for businesses to buy, figure how much money you are willing to spend on it. Always make sure to look for business within your budget limit because once you purchase it, you might need to invest a considerable sum in giving it a new direction. Find a business that aligns with your goals, resources, and budget. Always try to negotiate the purchase price, as well as terms.
- Letter of Intent: Once you have found a business for sale, contacted the seller, negotiated the price, you would need to submit a letter of intent. This letter contains vital information like terms you have negotiated, your negotiated purchase price, and why you intend to buy the business.
With this letter, you can have exclusive rights to the business for a temporary period of up to 90 days.
- Due diligence: Once you get the exclusive rights, you should start looking for all the necessary documents, including financing for the transaction. Other documents would contain tax returns of the previous three years, income statements, balance sheets of the ongoing year, and other necessary documents like business debt, leasing documents, legal records (if any), marketing materials, etc.
- Close the transaction: When you receive all the necessary documents, information, and papers during due diligence, you are now good to close the transaction. One of the safest ways to close the transaction is hiring a lawyer so that they can look at the purchase agreement and confirm that you are getting what you paid for.
Conclusion
Once the purchase agreement has been signed by both the buyer and the seller, you can set a closing date and ask your lender to finance the purchase transaction. Once all the paperwork is completed, the seller will receive his money and you will become the new owner of the company in Colorado.
Do not forget to purchase the necessary business license after the transaction is completed to avoid legal complications. If you are looking for a reputable business organization from which you can purchase a franchise to start your own small business, Window Medics is one of the leading companies from which you can do so.