Learn the fundamentals of investing in a business opportunity.
Business Opportunity are investments that allow the buyer to start a business. Typically, the seller of such an buying a business opportunity has no control over the buyer’s operations and in most cases there is no further connection between both parties after the sale.
Business opportunities often don’t provide much assistance, but that can be a positive if you value freedom. Most ventures require purchasing some type of set or materials and then allow you to operate it however and under any name you like – there usually aren’t any ongoing royalties or rights to trademarks.
This lack of long-term commitment can be a major deterrent to business opportunities. Without an established relationship, there may be many con artists out there who promise quick success and then disappear. Although the risk of being scammed has been greatly reduced, it’s still essential to do a thorough investigation before investing any funds.
Individuals or businesses can purchase the rights to sell ABC Corp. products, but not the trade name. A Minolta dealer might display the Minolta sign on his windows but cannot call himself Minolta unless he holds an authorized distributor’s license; whereas, a distributor sells directly to consumers or retailers, not just one-off customers like an authorized Minolta dealer does.
Licensees of Business Opportunity XYZ may use the trade name and certain equipment, technology or product lines of the seller. Business Opportunity XYZ may offer a technique for reglazing porcelain that it will supply along with necessary equipment and instruction to help you open your own business. Even though you can call your venture XYZ (or any other name), it remains an independent licensee.
Vendors often supply vending machines and are willing to help you locate them. Once the seller stocks your machines, you simply collect payment and voila! Your machines are ready for business!
Cooperatives enable existing businesses to join a collective of like-minded firms for promotional and advertising purposes.
Direct selling offers low upfront costs and allows you to sell directly your product line to family, friends, and other people. Direct-seller programs often require participants to recruit additional sales reps who form a “downline,” whose sales generate income for the rest of the program.
Checklist for Acquiring an Existing Business
If you are serious about purchasing a business, it is essential to select one that you are passionate about and take it to the next level. Passion alone won’t suffice; experience and knowledge play an integral role in making an informed decision when purchasing a company. Here is your checklist for purchasing an existing business:
1. Select the type of business you wish to acquire.
Focus on your interests, passions, skills and experience. A small business that combines what you love with some expertise will make you happier.
If you have been employed as a line chef at a restaurant for some time, and now feel the urge to own it yourself, who better than someone familiar with the business than yourself?
2. Search for businesses to purchase
Finding the ideal business opportunity can be done in several ways. These include:
- Classified newspaper advertisements in the “Businesses for Sale” category.
- Reach Out to Small-Business Owners in Your Network
- Attending meetups and industry conferences is an excellent way to connect with other business professionals.
- Collaborate with a broker.
3. Gain insight into why an existing business might be for sale.
Businesses owners may decide to sell for various reasons, from lifestyle decisions such as retirement to more serious issues like a financial crisis. There may also be deeper causes such as an underlying problem within the organization. It is essential that you comprehend why certain businesses you’re considering buying aren’t working for their owners.
Be wary of:
- Poorly constructed business plans (indicating no market exists for the product/service).
- Competitors who are ahead of the curve
- Existing business debts.
- Location issues.
- Inventory problems (cost-of-production is high and quality is poor), storage difficulties, supply/demand imbalance, etc.).
- Neglected Equipment: It is either outdated and costly to replace.
4. Finally, narrow down your search to a business that meets your goals, budget, and resources.
Before now, you may have considered several businesses. But now it’s time to focus your search. Select a business that fits within your budget, objectives and available resources.
Before considering other businesses, it’s essential to determine the ideal size, location and sales of your potential venture. Also determine how much money you are willing to invest into making changes to your existing business and how much this will cost you in total.
5. Conduct due diligence
Due diligence is the process of gathering as much information as possible before purchasing a business. It’s an essential step on your journey towards becoming successful business owner. To be sure you are fully informed, consulting an accountant or lawyer might be beneficial.
As the buyer, you should hire a competent accountant to review the financials of the business. A skilled business attorney can explain the structure of the transaction and represent you during negotiations.