Small Business Success: Early Operating Hurdles

Important Questions To Ask Before Buying Your First Business

First-time business buyers need to be diligent about doing research before investing in something. If you have never owned a business but have always wanted to be a business owner, then a great way to go about becoming one is to buy an already established business. The following questions are all very important to ask before you spend money on businesses for sale.

Passive Investment Or Full-Time Job?

The most important thing you need to do is determine if the business you plan on buying is a passive business or one that requires your full attention. If you're looking to keep your day job and simply want a second source of income, then you need to find a passive business. Many businesses require you to be fully involved and work a full week. However, there are some businesses where you can either delegate tasks to employees and keep your main job, or else the business is structured in a way so as to not involve direct work for 40 hours a week (think vending machine routes),.

Are Royalty Fees Involved?

Another important thing to investigate is if there are royalty feeds involved. Whenever you are researching businesses for sale, you should check if the business is associated with a franchise. In many franchise agreements, there are royalty fees involved. There are benefits to buying into a franchise. These include name brand recognition, as well as support from the corporate office. However, you should be aware of the royalty fees involved in any such purchase. 

Is The Market Over-Saturated?

Another important thing to investigate is whether or not the market is saturated. You should look around at the local area where you are thinking of buying and see if there are competing businesses. It is never a good idea to buy a business in a market where there are too many competitors. The more competitors, the more of a struggle it will be for your business to succeed. So ideally, you will want to buy a business in an environment where there are not many other businesses that sell the same product or service. 

What Is Your Experience or Interest in the Field? 

You never want to go into a field where you have little to no interest in the subject matter. It can make work feel like a drag and end up making you less productive. So ideally, you want to choose a business where you have interest in the work. Likewise, you also want to get involved in a business that you have some experience in. It will make everything run more smoothly.