Many entrepreneurs have dreams of owning their own businesses one day. The prospects of making money from something you build up from the ground is extremely inviting. Though the hard work and dedication that goes along with starting your own company can be tedious and challenging.
There are loads of factors you have to take into account when you want to start your own company. You have to build a client base, invest in marketing strategies, hire employees, and manage cash flow… all while not having a reputable track record.
That is why smart businessmen and women have started buying already established companies.
WHY DO PEOPLE BUY EXISTING BUSINESSES?
The most common reason why people invest in established companies is the fact that it’s much less risky. You will be taking over operational systems that are already put into place. As well as winning time in that the company already has a client base, employees, and a reputation.
Even though it often costs more than starting from scratch, you will be able to build on already existing procedures, policies, and systems. With an added bonus that employees are already familiar with.
Together with all the assets, you will also be owning all rights to patents, legal affairs, and copyrights. This ownership will prove to be very profitable in the future.
EXPERT TIPS ON BUYING A BUSINESS
If you are wondering how to buy a business in order for it to be a success, you can consider the following tips from experts.
Make the Right Choice
The first step in making your new business work is to purchase one that’s in the right industry. You have to make sure that you completely understand the industry as well as feel passionate about it.
Make sure that you are interested in all the challenges that this kind of company holds and that it matches your experience.
Consider the size you wish to have. Do you mind looking after a company with loads of employees and a great number of locations and facilities? Or would you rather feel more comfortable with a smaller company that can only be found in a certain location?
It’s important that you understand the industry to make sure that you’ll be able to grow within it. Making the right choice will ultimately have an effect on your future success.
Find the Right One
Even though you’ve decided on the right kind of industry you’d like to go into, you still have to find it somewhere. An excellent place to start looking is on platforms like Businesses 4 Sale. Platforms like this provide the most detailed marketplace to buy businesses of all types, empower you to make an informed decision, and help you quickly find the business you want. If you are interested in a company that isn’t listed for sale, you can approach them and make an offer. You never know. They might change their mind.
Additionally, you can consult a business broker to help you find sellers and negotiate beneficial deals. Brokers will be able to make better deals while getting their hands on all the necessary information you will need.
Assess Available Businesses
One of the most important parts of buying an existing establishment is that you assess everything that it entails. You need to put together a trusted team that consists of an accountant, a banker, and an attorney. Your broker will be able to help you find the best in the business.
Verifying and reviewing the potential establishment is vital before you continue with the purchase. This is also known as ‘due diligence’.
You should definitely ask the following questions about the company you are considering:
- Why is it for sale?
- What are its reputation and online presence like?
- What is its current relationship with clients, customers, and shareholders?
- Will it be profitable in the future?
- What do future plans look like for the company?
- How has the company changed over the previous few years?
- Are there any hidden financial issues that might jeopardize the future?
- What extra materials will be needed to fix what might be broken?
- Are current employees experiencing work satisfaction or will there need to be a change in company structure?
Also look at all the financial statements as well as income statements, tax returns, cash flow, balance sheets, and footnotes. Make sure that you consult the current accountant to analyze how the business has done over the past few years.
If everything looks in place after the preliminary analysis, you can ask your acquisition team to come up with a viable and fair financial offer.
Funding
It might be that you don’t have enough financial backing to go into a big project like this. Buying an existing company can really be a costly affair. If you can’t fund the process yourself, you might want to consider asking a partner for investment.
Other options you can consider would be to apply for a business loan or find venture capital. If possible, you can come to a payment agreement with the current seller, where you would pay off the fee on a monthly basis.
Sign the Papers
After careful inspection, you are ready to secure the deal. You’ll need legal help in drafting a contract that will discuss all terms that are agreed upon. Find an acquisitions attorney to help you with this process and give you advice throughout.
Be extremely conscientious during this process, it’s vital to your future to not leave any ambiguities in the contract. Make sure that all bases are covered and that everything is stipulated clearly. Once both parties are happy with the contract, all you need to do is sign on the dotted line and the business is yours.
Instead of taking a huge risk in investing in your own company, rather buy an already existing business. This isn’t to say that existing businesses don’t come with their own challenges. But when you do it the right way by following the above tips, you’ll be on your way to great success in no time.
