Has anyone ever bought an existing business?

[socaso]

This is something my SO and I are looking into. I wonder if anyone on the forums has ever done this and has any advice? We are open as to what type of business and we are just in the beginning phase of researching this which is why I don't have more details.

[A Fella from Stella]

Looked into buying someone's vending route (chips and candy).

Decided not to because the guy was saying it was worth one amount, but that he claimed significantly less on his taxes.

I also looked into buying a former employer's business, but the deal wasn't able to be made.

[BFGirl]

There is a lot to consider and it depends on the type of business.  If the owner has been super involved and has a good rapport with the customers, you will want to make sure you have them locked into some sort of employment/consulting and a non-compete.  You will need an attorney to go over the paperwork and some sort of financial person to go through the books.

[Fishindude]

Be very wary of buying any small business that handles a lot of cash.   Many owners of these type businesses will not have accurate books because they pocket a bunch of the cash without paying taxes on it.   They may tell you it generates $XXX revenue and profits, but unless they can share a couple years worth of their books generated by a certified CPA, it won't mean much.

[HBFIRE]

I've considered it but then realized I'd be basically buying a job, and maybe one that I'm not really well versed at or knowledgeable enough about.  Buying a business that is truly passive I think would be incredibly difficult, why would anyone sell something that is passive income?

I own my own business, but I'm an expert in the field and that's what makes it successful.  I think this is the way to go.  I'd be nervous about buying something that I'm not extremely knowledgeable about in a hands on practical way.  Hands on practical expertise is vastly different than understanding the business on an intellectual level.  Sure, I could learn as I go I suppose, and maybe for someone adventurous and willing to take on risk this is an option.

[socaso]

We are not interested in buying a business that would be passive. We want to be hands on and are looking for an opportunity that has some neglected areas that will allow us to grow the business.

[Telecaster]

Someone, I think it was @SeattleCPA pointed out the "P/E" ratio of buying a business is off the charts (on the good side).  Of course, you are also buying a job (usually), but it is kind of intriguing.   

[socaso]

That's what I have been finding in my research. Also the failure rate is much lower than a brand new business because it is already established.

[SeattleCPA]

Someone, I think it was @SeattleCPA pointed out the "P/E" ratio of buying a business is off the charts (on the good side).  Of course, you are also buying a job (usually), but it is kind of intriguing.

I possibly did say this. If I didn't, let me say that I agree with the statement...

BTW, in our CPA firm, we regularly see people sell and buy businesses.  And it can work really well. Though you need to be careful.

This is something that's more complicated than buying a house. It's pretty easy to determine roughly what a house is worth... and a home inspection shows whether there are problems... Further, you didn't typically need any special ability to live in house...

In comparison, you face more uncertainty IMHO about value. And due diligence won't necessarily identify the problems. Finally, you or I might not know enough to run the business we'd like to buy.

But, yup, you can get really good ROIs and even after calling a chunk of the profit "owner wages."