Buying a small business can be intimidating. It’s a large investment in an industry you may not know well.

Rather than starting from scratch, some potential entrepreneurs opt to purchase an existing company with a loyal customer base and stable revenue stream. But what should you look for in a business to buy?

1. Know Your Limits

There are a variety of ways to get into the business world. You can build your own company from the ground up or buy an existing business, such as a franchise. Buying an established brand can be less risky than starting from scratch because it provides a ready-made customer base and defined operating expenses.

The first step in the process is determining how much you can afford to spend on the purchase. This requires careful consideration of your finances and your motivation to own a business. You should also consider zoning laws, bulk sale laws (which govern the transfer of inventory), and state and local regulations. You may want to consult an attorney or business broker, who can help you understand your options and responsibilities.

2. Research the Industry

Research is essential when looking to purchase a business. Whether it is for the industry itself or your market, there are many free sources of information available on consumer markets, demographics, and economic indicators that can help you get a sense of what to expect.

The other advantage to researching the business you’re thinking about buying is that it will give you a clear view of upfront costs. This is particularly helpful when making a decision between starting a business from scratch or an existing business. By doing your research, you can make a well-informed decision that best fits your goals and objectives. Buying an established business is often less risky than launching a new company from the ground up. This is because the original owners have already tested the waters and developed a proven concept.

3. Identify Your Needs

Buying an existing business can avoid some of the startup costs and growing pains associated with starting from scratch. It also gives you an established customer base and a clear operating budget to work with.

To ensure that you’re purchasing a business that matches your long-term goals, you’ll want to conduct market research to assess the industry, growth opportunities and competition. You’ll also want to look at organizational paperwork, zoning laws and environmental regulations.

There’s no one place to find small businesses for sale, so you’ll need to utilize various resources. This includes online search platforms like BizBuySell, business brokers and local classified ads. You can also keep an eye out for new opportunities through industry conferences and networking events. You can even ask friends, family and coworkers to keep an eye out for any potential ventures.

4. Talk to the Owner

Finding the right small business to purchase should be an important part of your planning process. You can find businesses to buy in a variety of ways, from online browsing to personalized assistance from brokers.

Before agreeing to buy a business, talk to the current owner to learn more about the company’s history. Ask them about why they’re selling and what challenges they’ve faced over the years.

Also, make sure to review all of the legal documents related to the business. This includes organizational paperwork, zoning laws, and bulk sale laws (which prevent sellers from evading debtors by hiding assets in a business acquisition). Lastly, double-check that the business abides by all environmental regulations for small businesses. If it doesn’t, you could face hefty fines down the line. At bizop, it helps you through this process seamlessly.

5. Negotiate

In business, you’ll be negotiating a lot. Practice your key points before the meeting and consult a dependable, straight-shooting friend or colleague to help you strengthen your arguments and identify weaknesses. Use factual support, like market comps and industry research, to justify your requests.

You’ll also need to crunch numbers and find a balance between what you want in the business and how much it can reasonably afford to sell for. Calculate your ideal size, location, sales and staff to find the scale you’re willing to operate within before negotiations begin. The seller may be willing to compromise on a few terms to get the deal closed. Using the right negotiation strategies will help you reach an agreement that benefits both parties.