Things to take care before buying a business

Buying a business that already exists can be a great way to get started with something that is already working, and thus avoid the delicate phase of starting from scratch. But obviously there are risks to take into account. Today we are going to give some tips to buy a business. Business Hour is the one stop destination to get latest business ideas at your fingertips.

Buying a business is a rational decision, not an emotional one

Having a restaurant, a bar, a clothing store or a pet store may have always been our life's dream, and although it is always better to undertake something that we are passionate about, we have to make business decisions based on rational facts , not in the illusion generated by the project.

Make sure you have the knowledge and skills to carry it

One of the rational reasons to acquire a company is to have a good degree of certainty that we are qualified to manage it. Because in most cases, knowing how to run a business requires specific knowledge. The ideal is to invest in a sector in which we have professional experience. If not, it would be necessary to train seriously. Read the latest Business news in malayalam .

How profitable is it?

The reason for buying a business is to make a profit. Like any investment, we have to be able to compare the purchase price with the expected benefits from year to year. And to value this data, it is essential to have objective historical data from the seller (the more recent, the better).

In the most professional sales, what is called the “data room” is usually prepared, that is, all the relevant information about the company (financial statements, contracts, payroll, etc.) are made available to the potential buyer so that you can assess all aspects, with due confidentiality.

Even to buy a small business it is essential to review all relevant aspects of the business, and ask for reliable and verified financial data. In some sectors there is a bad habit of not declaring income, and it is possible that the seller claims that the real profitability is much higher than what appears in the books, but as a buyer this cannot be worth us: we want objective and reliable data. read the latest business ideas in malayalam .

For what reason is the business sold?

It is a question that we have to ask ourselves, and we have to be very cautious, especially in these times of economic crisis. Obviously, selling a business for retirement is not the same as if things go wrong . Having the most recent financial data can help us assess it, but anyway there could be some other factor and it is better that we look for other sources of information than the seller to be sure. For example, there may be a legal change that is going to have a very negative effect on the business. 

 

What profitability will I be able to obtain?

We can find two cases.

• In the first, the business for sale has a good profitability, difficult to improve. In theory the investment is very interesting, since we will only have to maintain the benefits (although it is not as easy as it seems). But in reality, normally the seller is very clear about the benefits and is going to ask us for a very high purchase price.

• The second case is a business that has a low profitability (or even has losses) but we are interested because we have identified opportunities for improvement. Obviously, they cannot be mere conjectures, but we must have prepared the corresponding studies that indicate the estimated profit improvements.

For example, we could have negotiated a better contract with a supplier or have an important client agreed, or have an expense adjustment plan.

A comment about the transfers

If you are thinking of buying a transfer, it is essential that the old business is still in operation. Some companies that closed months or even years ago continue to claim to charge money for the transfer of their activity, but this does not make economic sense . The same happens if you are going to start a totally different business. It is not acceptable that a clothing store asks me for a transfer if I am going to set up a bookstore (it would even be debatable if I set up a clothing store of another brand).

If the business is closed, it is no longer a transfer, but a place for sale or rent, and it is negotiated as such.

Can the business work without an owner?

This is a very important factor, especially if we already have other activities. The ideal is to have a company with a well-organized structure and trustworthy staff that we can manage without always being above the business. Even if the company is going to be our only activity, this will allow us to go on vacation more relaxed.

In some cases, especially small businesses with little staff, it is very difficult for the owner to leave, even for a few days. For this reason, many restaurants close in August and these are the owner's only vacations. You can always look for alternatives to be able to delegate a little, but anyway it is a question that must be asked. Our future life depends on it, and we have to be aware of the degree of commitment that buying the business may entail.

Ask for the help of a professional

Before buying, you need to get advice. Depending on our knowledge and experiences, we will have to ask one professional or another for help, but we can hardly be experts in everything. A financial advisor , a lawyer, an architect, and possibly more professionals can help us depending on the doubts that may arise about profitability, contracts or the premises.