It is indeed very advantageous if you can buy an existing business, as a customer base will already be established, business operations will be conducted by experienced employees, and you can concentrate on improving services or products rather than spend time on establishing the business.
Things to Consider While Buying a Business:
• The first thing to consider is the type of business it is, if it is suitable for you, and if you are capable of running it. Consider the legal structure, the working hours, and (most importantly), if it can be purchased within your budget.
• It will be necessary to do some market research as well as a competitive analysis to check the market for the services or products and judge if it will be a viable option.
• Consider the reasons for the sale and ensure that you have a trustworthy attorney to study all documents, ensuring there are no hidden clauses of any kinds or liabilities. Check the liabilities as well as any assets that may be included and determine their exact value. If there are liabilities, will you assume them and can you break even? Seek his help to study the existing lease and to study a new lease if the landlord so desires it. Study factors affecting trademarks and logos, etc.
• Ask for and scrutinize the past few years’ income statements and have a cash flow projection done, study the customer base as well as the employees on hand and determine how they will react to the change.
• Identify key suppliers and traders and ask them if they will continue doing business with you and at what terms should you buy the business. Determine if there are any warranties or guarantees for products sold and if there are to be financial allowances to cover that aspect.
• Determine and valuate the business, making sure you are not paying more than you should. Talk with the seller and reach an agreement regarding rate and the mode of payment.
• Determine the capital necessary to begin operations once you assume ownership and arrange for the funds.
• Have your attorney and accountants study the past few years’ tax returns and determine if purchasing the business will somehow affect the tax issues.
• Make sure your due diligence is thorough and that all aspects are scrutinized thoroughly before deciding to buy the business.
• Check the list of inventories and make sure that they are not obsolete.
• Check if the equipment and systems are in the condition they are said to be and that they were regularly serviced and maintained.
• Study the business plans carefully to become familiar with the business operations as well as to identify areas where changes may be necessary to improve performance.
These are a few things to be considered while buying a business. Once you buy and start operations, it is recommended that you use the services as well as the products that are in the market to help new entrepreneurs like you become successful.