Buying a business can be stressful, here are some questions to consider
When it comes to buying a business it can be challenging, what questions to ask when buying a business, some questions may be what type of licenses you need, can I turn this business into a big brand, and much more but if done right and you watch out for red warnings you may just get yourself a good deal. There is a lot of stuff to look for when you find a business for sale, Majority of routes usually show their weekly income rather than their yearly gross because this helps you better determine how much you can net a week, but there is more stuff to consider before buying a business and we listed them below.
Lowering prices to get more customers when ready to sell? read 8
8 questions to consider when buying a business
If you're thinking of buying a business, it's important to ask the right questions. This will help you make an informed decision and red flags when buying a business down the road. Here are some questions to get you started.
1. How Much Can A Route Cost?
Well, it depends on the business itself. Usually, it can cost you $20,000 upwards in the millions. Moreover, brand name, territory, number of stops, number of trucks, etc., also play an important role in the business price. Negotiation also plays an important role in deciding costs. You can get the route at the best competitive cost with negotiation. If you directly buy a route from the company without a brokerage firm's involvement, you don't have to pay a commission to the broker.
2. Go for A Protected Route or An Independent Route?
Again, it is up to your choice. But many professional buyers ask this question when buying a route business, they want to secure their investment and the best way to do that is by buying a secured route, this type of route is a protected route as it has pre-decided stops or points, and fewer hassle but this usually goes under a brand that has rules to follow as they own the brand and are very protective of who buys the route. On the other hand, buying an independent route is safe too but you will need to examine the customers and order history more on this in question number 8.
Independent routes allow you to take multiple supplies, and you can earn more profit compared to protected routes. Independent routes include bread, meat, dairy, vending, etc., and are more competitive as compared to protected routes. Skys the limit with independent routes as you make your own rules and build your brand. Moreover, independent routes require less money as compared to brand name routes, but brand names offer you a secure customer base and a well-known distributor.
3. What Are the Best Routes To Buy?
It is good to know some best routes to buy before investing your money in the route business.
You can invest in Courier routes such as FedEx. In addition, you can invest in food delivery services, grocery, and bread delivery routes. Personal services routes such as pet grooming and pool servicing routes are considered best. However, if you own a route of a well-known brand Like UPS, you have to adhere to the rules and regulations of this company while being an independent operator.
4. I Don't Have Sales Knowledge, Should I buy Route Business?
Usually, a route business does not require any prior business or sales knowledge. There are different route business investment opportunities in the USA. You can go for any route business of your interest but keep your finances in mind too. Different brokers make sure that the seller initially works with you for a few days to make you familiar with the route-based businesses and their functionality.
So it doesn't make any difference if you have prior route business knowledge or not. Once you buy a route you study the market, get to know the customers ace the business then seek to grow and build it even bigger don’t juggle too much at first try to keep the original customers that came with the purchase happy and slowly grow a customer base around them, a lot of entrepreneurs purchase routes as a second income and being an owner absentee business.
5. Do I Need Special Licenses?
Yes, if your route is the delivery route and it includes a truck, then you need it. However, most routes for sale include a vehicle, so you need a license. For the average bread, chip, or cookie route, all you need is a regular license, but if the vehicle is heavy, then you need a special one such as CDL Class "B" or non-CDL Class "C" license depending upon the vehicle. Special licenses can cost you up to $ 1000. Once you select which route you are interested in, ask the broker representing it or the owner which license is needed and also contact your local agencies just to make sure.
Other businesses may require different types of licenses for example waste removal businesses, another important thing to look out for when we asked a frequent buyer of routes what questions to ask when buying a business was about this topic and he said he once brought a business that required a certain license that took him almost 7 months to get approved for so he said ts urgent to get a list of every type of license that business needs and see how the process works for obtaining them is so some may and either may just require the basic but look out for businesses that may require permits and hazmat licenses so make sure to ask before making a purchase.
6. Is Route business A Good Investment?
Any investment can be good or bad, routes are scalable and very manageable if you like dealing with customers and providing service then maybe a route is good for you, benefits of owning a route are You can set your delivery schedule to grow it to become bigger make it as a side hustle. In short, you can become your boss when investing in a route business. It's all up to you. Overall, it is good to invest in the route.
7. Should I Go for distribution-based Routes or Service-based Routes?
Delivery routes can be anything from delivering beverages to delivering home heating oil, delivering doesn’t require many skills it supplies on-demand business you provide what the customers want you to get a profit for the work so how much does h it cost you wholesale you add your profit and collect payment from customer some cons that come with delivery business is, you can be responsible for returning damaged goods, expired items or orders being returned just cause the owner of business changes his mind that's just some perks of owning a delivery business.
Where now a service requires a certain level of skill example landscaping routes seems easy right? But landscaping takes time to master how much water to grow grass a day. How much soil to apply? What type of trees is sun friendly? Which trees die in the cold? Now you ask yourself if you have no clue about landscaping do you want to buy one? The best option will be to learn the business first before buying it. Do you want to learn a new skill that will cost you hundreds of thousands of dollars? That will be one costly lesson.
8. How long have customers been with the previous owner?
Say you found an amazing route, a customer base of 400 plus, weekly sales are high and the weekly net is more than you were looking for. But the price seems too good to be true... Here's a way to determine if the customers are real! request at least a year of invoices from customers to see how much they buy or get service, this will help you figure out if the customers have been with the business, if they have been around that long then the business may be legit to buy but if they only been around for a couple of months or less then maybe they owner lowered the prices to get a quick sale.
Buying a business can be a great way to jumpstart your entrepreneurial journey, but it’s important to do your homework first. By knowing what questions to ask when buying a business and watching out for these common traps, you can minimize your risk and increase the chances that your new business will be a success. So, what business are you going to buy?
To the best of our knowledge, the information provided on this website is not intended to be taken as professional financial advice. Consult a professional financial or tax expert if you require this advice.