Choosing where to buy a business

Most people start a search with an industry or a price in mind. Where the company is matters just as much. You'll be there most days for years, so the location decides your commute, who you can hire, who your customers are and how many companies there are to choose from.

It's worth settling the area before you look at a single company. A clear search area keeps you from falling for a good business in a place that doesn't work for your life.

Start with where you want to live

The first question isn't about business at all. Are you staying where you are, or are you willing to move?

If your family is rooted, with a spouse's job, children in school or parents nearby, you'll be looking at companies within a reasonable drive of home. That's a real limit, and it's fine. Plenty of good companies are close to wherever people already live.

If you're open to moving, the field gets wider, but so does the risk. You'd be learning a new town, new employees and new customers while you learn a new business. Some buyers do it well. Just count it as a second big change, not a detail. Our post on whether you're ready to own a business has questions worth asking your household before you decide.

Drive time: draw an honest circle

The owner of a small company is often the person who gets the call when a truck won't start, an alarm goes off or a key employee calls in sick. You'll make the drive at odd hours, and you'll make it a lot.

• Pick a limit and stick to it. Say 30 or 45 minutes from home, whatever you'd accept five days a week for years.
• Drive it at the hours you'd really drive it. A trip that takes 35 minutes at noon can take far longer at 7 a.m. on Interstate 4, Interstate 95 or a bridge across Tampa Bay.
• Think about where the work happens. For companies that go to their customers, like HVAC, pest control or pool service, the service area matters as much as the shop. If the customers are on the far side of the shop from your home, every workday gets longer.

Then draw the circle on a map and list the counties inside it. That list is your search area.

Look at the local economy

A company's customers get their money from somewhere. Knowing where helps you judge how steady the business will be.

Florida shows how much this varies. Broadly speaking:

• South Florida is the state's largest metro area, with deep ties to international trade and travel.
• Southwest Florida and parts of the Atlantic coast draw many winter residents, so business swells in the cooler months.
• The Panhandle and North Florida has military bases, the state capital in Tallahassee and beaches that are busiest in summer.
• Orlando and Central Florida is known for tourism, with health care, universities and growing suburbs alongside.
• The Space Coast has an economy that follows the space and defense programs around Kennedy Space Center.
• Jacksonville and Northeast Florida leans on its port, logistics and the Navy, and is less seasonal than the southern half of the state.

A few questions apply anywhere:

• Is it seasonal? A company that does most of its business in four months needs to cover the loan payment in the other eight. Ask for monthly revenue, not just yearly totals.
• Does the area depend on one employer or industry? A town built around one base, plant or attraction rises and falls with it.
• Is it growing? New subdivisions, new roads and new shopping centers mean new customers for companies that serve homes and businesses. Drive around and look.

Labor: who will do the work

Small companies run on people. The best location for customers can be a hard place to hire.

• Can you find the people the company needs? Technicians, drivers, dental hygienists and licensed tradespeople can be hard to find. Ask the seller how they hired their last few employees and how long it took.
• Where do employees live? In expensive coastal and resort areas, workers may commute a long way, which makes them easier to lose.
• What do the jobs pay nearby? The Bureau of Labor Statistics publishes wage estimates by occupation for metropolitan and nonmetropolitan areas. If the company pays well below the local going rate, plan on raises after you buy.

Competition and how many companies there are

You want enough customers to keep the company busy, and enough companies in your circle that you can find one to buy.

• Count the competitors. Search maps for the kind of business you're considering. For licensed trades and professions in Florida, the license search of the Department of Business and Professional Regulation (DBPR), at myfloridalicense.com, shows who holds licenses and where.
• Count the companies. The Census Bureau's County Business Patterns reports the number of business locations with employees (it calls them establishments) by county and industry. It won't name them, and a company with three branches counts three times, but it shows whether your circle has five companies of a kind or fifty.
• Read the mix. Many small, long-established companies in one industry can mean more owners nearing retirement and more chances to buy. A market dominated by a few large firms can mean tougher pricing for a small one.

If your circle holds only a handful of companies that fit your budget and industry, you have three choices: widen the circle, widen the industries you'll consider, or accept a longer search.

Licenses and local rules

Some rules change from one place to the next. In Florida, a construction contractor such as a roofer, plumber or air conditioning contractor can hold one of two kinds of state license. A certification allows work anywhere in the state. A registration allows work only in the local areas where it was issued. That's set out in section 489.105 of the Florida Statutes. If you buy a company with a registration and hope to grow into the next county, check what it would take first.

Counties and cities also issue their own business tax receipts and permits. A local attorney or accountant can tell you what applies in the area you choose.

Storms and insurance

Location affects what it costs to protect a business. Property and flood insurance can cost very different amounts on the coast and inland, and in one flood zone versus another. Before you settle on an area, ask an insurance agent for rough quotes on the kind of property you'd be operating from.

What to do this week

1. Write down where you'll live for the next five to ten years, and the longest daily drive you'd accept.
2. Draw that circle on a map and list the counties and towns inside it.
3. Drive the main routes at rush hour, at least once.
4. Look up County Business Patterns for two or three industries you're considering, for each county in your circle.
5. Look up local wages for the jobs those companies depend on.
6. Read up on your region's economy, and note what makes it seasonal, steady or growing.

The right area won't make a weak company good. But it will make a good company one you can actually run, from a home you actually want to live in.