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BizReport : Internet : June 15, 2017

Expert: What to look for in buying a small business

While it's the dream of many to open a small business, some get into small business and realize it isn't for them. Still others like the challenge of starting small businesses, but prefer to sell once the business is up and running. In either case, here's what you need to know before buying a small business.

by Kristina Knight

Kristina: Why does it seem there more SMBs changing hands now than in the past?

Bob House, President, BizBuySell: A variety of factors are likely driving the increase in business transactions including a healthy economy, strong small business financials and improved access to financing. In general, we're also experiencing a more balanced business for sale market that continues to benefit both buyers and sellers. Retiring Baby Boomers, in particular, are fueling the market supply with quality listings. At the same time, younger buyers are finding attractive, healthier businesses for sale alongside greater lending options.

Kristina: What should entrepreneurs look for when considering buying a small business?

Bob: There are a few factors that contribute to a business' value that buyers should evaluate carefully. These factors include the location of the business, the demand for the product or service sold to the customer, the existing customer base, the business' financial records and cash flow, supplier relationships, trained employees with low turnover, and how the business stands against the competition. Understanding how the business ranks in these core areas will help you discern good buys from not so good ones. Ultimately, though it's about profitability and cash flow of the business. Buyers should look for businesses which are profitable, but where the buyer can readily identify additional things they can do to increase the profitability, such as adding delivery, staying open for longer hours, or offering additional products or services.

More from Bob and BizBuySell tomorrow, including how to sell a small business.

Tags: BizBuySell, sell a small business, small business, SMB trends

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