Buying a business with limited money
When searching for a business to buy, you will have capital earmarked for the transaction which may either be plentiful or modest. Buying a business on a budget can prove to be a profitable decision if you handpick a business with low overheads and conduct thorough due diligence checks to identify the risk level, profitability, and growth potential.
Starting a business on a budget
There are many reasons why you may decide to buy a business on a budget which we run through below, such as if you have minimal capital or to establish a side venture in addition to your main business.
Professional service: You may buy a business to transition your hobby into a full-time professional service available to customers on a regional or national scale. As this will mark your first leap into the role of a business owner, it will take time to build cash flow and cash reserves, which is why a budget business may be best suited.
Minimal capital: If you have minimal capital, buying an existing business that is already equipped with materials, resources and equipment can drastically reduce the amount of investment capital required and time spent sourcing products when starting out. You may seek finance to buy an existing business or negotiate seller financing to facilitate the transaction if you have minimal capital.
Side venture: You may buy a business to create an additional income stream to complement your primary source of income. A successful hobby supported by an already established customer base and sustainable business model may be monetised into a side business.
Supplementary business: A small investment fund may be set aside to buy a secondary business to support the first. This tactic may be used to enter a new market, for example, from B2B to B2C, provide an additional offering, or launch a new service. Buying an existing business can give the business seller a head start as the identity of the brand has already been established, along with the customer base.
Low-overhead business: If your business strategy is to operate at a low cost with minimal overheads, you may buy a business on a budget to align your actions to your intentions. A host of low overhead business models have been designed to incur minimal running costs.
We explain what constitutes a low overhead business and common low overhead business ideas.
- Previous sales and acquisitions experience
- Sector specialisms and average success rate
- Sales value expectations and growth potential
Low overhead business ideas
A company overhead is a running cost incurred to operate a business, such as rent, utility bills or insurance. Company overheads are taken into consideration when buying a business, as if running costs are high, this could have a detrimental effect on company cash flow and profitability if income unexpectedly dips.
A high maintenance business must be supported by a steady income stream to cover both fixed and variable expenses. Fixed expenses can be forecasted as they are unlikely to change, whereas variable expenses are mitigated by many factors, such as trading activity or market conditions.
An example of a low overhead business includes one that operates remotely, such as online. This eradicates the costs of renting, leasing, or buying property, or office space. A service-based business can operate remotely, and even from home as it is not dependent on physical stock. Stock-based businesses can further mitigate their overheads by partnering with a fulfilment centre that can house and distribute stock on your behalf.
Simplifying your supply chain and minimising intermediaries can reduce costs and make way for low overhead operations.
Return on investment when buying a business on a budget
If you are looking to buy a business on a budget, perform due diligence checks to assess long-term return on investment. By tracking the existing performance of the business, you can forecast how much you can realistically generate in profits following the business transfer. Business intelligence software can also provide an insight into the financial health of the business, key financial risks, and financial ratios, such as liquidity and liabilities.
If you can pay off the business over the long term by capitalising on industry trends and implementing a strategic investment strategy, buying a budget business can be lucrative. A budget business with abundant growth potential can accelerate income under the hands of an innovative business owner.
To buy a business on a budget, get in touch with a member of the Selling My Business team to discuss cheap businesses for sale and finance options to help facilitate the transaction.
