Starting a new business from scratch can be a daunting experience, which is why so many people hope to purchase an already existing business. It allows you to skip the stressful startup phase so you can focus on running the business the day you take it over.
Unfortunately, there are several risks involved in purchasing a turnkey operation. You should have no problems finding lots of already existing businesses, but there are many that you will want to avoid buying. Before jumping the gun, find out as much information as possible about the business, its clients, and its current owner. If the business has built a bad reputation amongst its clients, then changing people’s perceptions might prove tricky.
Why Is The Business For Sale?
If the owner is telling you how great the business is, then why is it on the market? If the business sounds too good to be true, it probably is. Don’t just take the owner’s word for it, do a little digging yourself. Speak to people who are familiar with the company, such as staff members, existing and old customers, competitors, etc. Anyone who can give you an insight into the business will prove beneficial. This vital information will give you a better understanding of what the business is really like and if it is worth the money.
Of course, people retire, even founders of a business need to call it a day at some stage, but very few entrepreneurs will throw in the towel when their business is doing well. Even if it is a success, the day-to-day running of the business might be too stressful for the current owner to manage. If the business is going under the owner might look for a quick sale so they can make some money before it’s too late. Even though a business looks like it is doing very well from the outside, it doesn’t mean that the financials are in good shape.
What is The Asking Price For The Business
Nobody likes paying above the odds, especially when they are heavily investing in a business. Ask them to show you why they feel their business is worth the asking price.
If you think the asking price is set too low, then the price might not include the company’s assets. You will want to know exactly what is included in the deal before spending a single penny. Find out if the assets listed in the sale are clear of debt. Business owners looking to sell their business are known to hike up the cost of their assets to make their business seem more valuable than it is worth. Of course, they might be telling you the truth, but just in case, find out the current costs of the assets to give you an idea of their current value. If the seller has provided you with an inflated value on the assets, what else have they been lying about?
Employ A Business Broker
Of course, there are several businesses for sale, but finding them might not be as easy as you thought. Speak with a reputable broker like Toowoomba Business Brokers for advice. Sellers often get a business broker involved to help advertise and sell their company. Having a business broker on board can help you save a lot of time and stress. They can help structure the offer and assist you through the negotiating stages. They will guide you through the entire process, and they should have no problems answering both simple and complicated questions you might have about the deal.
You might want to think about employing an attorney. Lawyers will be able to review all of the purchase documents, and your broker might advise you to speak with an attorney before the sale has been agreed upon.
Although hiring professionals might burn a hole in your wallet, which might be the last thing you want to do when investing in a business, by doing so, you will get a clearer image of what you are buying. Having experienced professionals in your corner will help put your mind at ease.
Make an Offer
So you’ve done your homework and you feel you can make a success of the business, now it’s time to make an offer. During negotiations, the buyer places an offer and then the seller tends to make a counteroffer. It can be hard to satisfy both parties, especially if both offers are very different, but the idea is to find a middle ground so the seller and the buyer can come to an agreement.
If the agreement is made, you can expect the seller to ask for a deposit, which is often non-refundable. This is normal, and it shows the seller that you are serious about buying the company.
