If you buy a business in San Francisco that is already operating, you can bypass the many challenges of start-up and start enjoying cash flow right away. Some other fantastic reasons to buy an existing business in San Francisco include:
Your resources are already in place. Although you are usually free to make changes, an existing business often has established relationships and accounts with reliable suppliers. You can skip the trial and error phase, and begin working with established providers who are already familiar with the company’s operations.
Your employees and customers already have relationships. In most cases, when you buy an established business in San Francisco, you will retain some staff and customers. Trained employees that anticipate the needs of the company’s existing customer base can be a tremendous asset during the transition of ownership.
Permits and licenses are already established. When you buy a business that is already operating, you don’t have to worry about finding and getting approval on necessary permits and licenses for your industry. Many licenses can simply be transferred, and you can feel confident that most re-applications will be granted based on prior approval.
If you want to reap the benefits of purchasing an established business, you have to be careful to choose a business that is well-run and profitable. However, there is more to finding the right business than operational efficiency and cash flow. If the business is not well-suited to your needs, a smooth-running system can quickly fall apart.
Your search should begin by asking yourself questions to identify what types of businesses suits your strengths and personality.
In what environment do you thrive?Do you prefer to work outdoors, perform calculations in an office, or whip up creative dishes in a kitchen? Most small businesses require long hours, so make sure you will be in an environment that is most natural for you.
How much contact with the public do you desire?All businesses require contact with customers, but some require a higher degree than others. If you prefer to work quietly and minimize interaction with people, businesses that rely heavily on customer interaction should be crossed off your list.
What skills and experience do you already possess?If you can find a business that is in a niche you are already familiar with, you will have the best chance of success. You don’t have to choose something that lines up with your current profession, but it should at least be an industry in which you are familiar with the terms and trends.
Once you have narrowed the choices to businesses that are suitable for your interests and experience, it is time to evaluate the business itself. Due diligence should be conducted independently, but there are a few aspects to make sure you consider.
Why is the owner selling?The first thing you should find out is why the current owner wants to exit the business. It could be for retirement, relocation, or to pursue other interests. However, it could also be a decline in demand, an increase in competition, or the fact that most of the business’ equipment will need to be replaced in the next year. Make sure you get details before moving forward.
How much working capital will you need?Some industries will require much more than the purchase price to get started. Ask how much capital is necessary for inventory, overhead, and insuring accounts receivable. Find out how long it takes customers to pay invoices and what payment terms their suppliers offer. These questions can offer insight into cash flow that you might not see by looking at a balance sheet.
Are there off-season times you will need to consider?Make sure that you know more than just total profit. Ask about seasonality and how much income you need to set aside in the most profitable months. Find out if there are times when you need to hire more help or lay off employees to meet payroll.
The many facets of evaluating a business for purchase can seem overwhelming, but they are not impossible. Sunbelt of San Francisco can offer the experience and support that you need for a successful purchase.
Contact us to discuss your Alameda area business interests.
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