So you are thinking of buying a small business in canada. Congratulations. With redundancies still rife in the world, more and more people are coming to the conclusion that maybe – just maybe – it’s better to head your own business instead of relying on other people to bring in the money.
From that moment that you decide to buy a business, it’s just an idea. There are so many questions buzzing around your head. What are the advantages? What’s in it for me? More to the point, what are the potential problems? What you need to do is sit down and consider the following key issues:
What sort of business do you want to buy?
You will need to focus on what sort of business you would like to buy into. Draw on both your past work experiences and your interests. You may well want to buy a business that you have great knowledge of but have little or no experience of working in that sector.
Make sure that you are fully capable of running the business you want to buy into. You need to be absolutely confident that you can make it a huge success.
Do you want to buy a business or a franchised business?
There is a difference. A franchised business will have several chains across the country, and will probably have a well-known brand name. This is a good advantage when it comes to buying into a franchise. People return to a business time and again if they recognise and trust a brand name. You will also have greater support. If you are going into business for the first time, then this could be a considerable plus point, since the franchisor will be there to “hold your hand” as it were.
The franchisor will normally deal with training, marketing and will be able to provide you with clients the moment you begin work. There will also be other franchisees to turn to for advice and support.
However, the downside is that you are still technically working for someone else rather than running your own show. If you own your own business, it is up to you how you proceed, and if there are any changes that you wish to make, then you are free to do so. A franchisor, however, makes the decisions.
The other downside, of course, is that, in very rare cases, the franchise, for whatever reason, can go out of business – whether it’s affected by management issues or other franchisees rocking the boat. As I said, these are very rare cases, but you need to take all this into account when making your decision.
Do I have enough money?
Buying a business or a franchise will, in most cases, require a hefty sum. Look at how much money you have. If you have been made redundant recently, you may have received a sizeable payoff. You may have inherited money. Or you may find that you already have the means to buy a business. If not, however, then all is not lost. You can visit your bank to apply for a loan to buy the business.
You will need to draw up a convincing business plan, outlining your expectations and profit margins. In the case of a franchise or a well-established business, banks will look favourably upon this, but as long as your plan has enough credibility, then this may still work. But make sure that you have enough money to proceed – if you are buying a business, you will also need to pay for surveyors, lawyers and accountants.
Is there a risk in buying a business?
This is where you need to do considerable research. Make a shortlist of the businesses that you are interested in. When you have whittled them down, find out all you can about them. What sort of track record do they have? Have they made the business a success? Or are there any incidents or problems that may prove a problem? You need to weigh up all the pros and cons and most importantly assess the risk factor when buying a new business – in order to make sure that you don’t buy a business White Elephant.
Will I be happy with the new business?
That’s one of the most important criteria that you need to consider. Will buying a business fulfil your career dream? Will it allow you to progress and allow you to develop your skills to the point where you achieve your goal? Will your chosen business allow you to do these things? Buying a business will be one of the most important things that you do in your life, so make sure that you get your choice spot on the first time.
Your personal and professional experiences are the first things you need to consider when you want to buy a business. You should be passionate and interested in the venture you wish to own and manage, and you need to be good at it. In certain cases that a line of business is not exactly your area of expertise or interest, it does not necessarily mean that you should opt out of buying that business.
In cases wherein lack of experience is involved, you need to consider retaining the key staff or hiring qualified replacements. This will surely lead to bigger profits.
The location is another essential aspect to consider when you buy a business. Think about these questions: Is there a big demand for your services or products in your chosen area? Will this demand change in the near future? How big should your location be? What are the sales and profits you can expect in starting a business in this area? Are new management and staff necessary? You must have solid answers to these questions in order to ensure that the process of buying a business goes smoothly.
After deciding on the business you want to invest in, you will then need to assess its value. Take note that there is no best method to determine the value of a certain business. Professionals generally recommend approaches depending on the type of business and industry.
With this, it is best that you learn the history and the operations of the small businesses for sale that are on your prospect list. You should consider hiring an experienced business broker. This is to avoid any possible buyer-seller conflicts on certain issues. A professional broker will be able to guide you in this matter.
How Much Money Do You Need When Buying a Small Business in Canada
Determining the right price of a small business for sale is one of the most challenging aspects of purchasing a business. The task of getting a trustworthy and reliable financier is also an issue. The capital you need for investment depends on the size of the business you intend to purchase. If you are planning to buy a small business, you may use your personal savings to finance a big portion of the overall cost. You also need to be sure that there are enough funds available to sustain your prospect business in the long run.
Seeking the help of a third-party financial institution is also a reasonable option in financing your business. Look for credible and trustworthy companies such as direct lenders and banks.
For banks to approve your business loan money, you need to prepare certain requirements like personal collateral, a solid business plan, as well as the information of the business you want to purchase and manage. There are other institutions that are willing to lend money aside from banks. These are generally commercial finance and venture capital companies.