What you Need to Know when Buying a Business

Buying versus starting from scratch

Some of the advantages of buying a business are:

You're in operation immediately and therefore have immediate income

You may face less risk of failure than if you start from scratch

You may be able to finance the business easier because of established credit

You purchase an existing client/customer base

You eliminate a potential competitor in your industry.
The disadvantages to consider are:

You may pay too much for the business if you haven't done your research

You may inherit a poor image if customers or employees are dissatisfied

You may be unaware of new competition entering the market

You are left with any previous problems (financial or otherwise) incurred by the seller.

Investigate

The first step is to find out why the business is for sale. One of the primary reasons a business is selling is because it is failing in some way. By gathering as much information as possible about the business, you should be able to pinpoint its weaknesses. Question whether or not it has potential for future growth and what some of its prospective shortcomings might be.

Whether you want to acquire a service, retail, manufacturing or wholesale business, be sure to analyse the industry market as well. Determine the current industry trends and who its customers are.

Evaluate

The next thing you need to do is evaluate all aspects of the business such as:

Location
Management
Goodwill
Inventory
Customer/client base
Suppliers
Equipment
Employees
Legal contracts
Financial Statements/Records.


At this point you should consider seeking the advice of a solicitor to handle the legal documentation and an accountant to analyse the financial/tax records.

In some cases, such as when you're buying a large business, you may also decide to consult a business broker whose expertise will focus on your interests and help to reduce the risk of overlooking important details.

Negotiate

When you have thoroughly investigated and assessed the value of the business, you can begin to negotiate a price with the seller. It is important to document all settlements to make sure that both you and the seller are clear on what is being negotiated. Again, a broker can simplify the bargaining process and do most of the paperwork for you.



What you Need to Know when Buying a Business - To learn more about this author, visit Sue 's Website.

Like this article? Share it with your friends

E-Mail | Print | More

Related Articles
Buying a Business FAQs
	What are the advantages and disadvantages of buying a business?
Lease Equipment
	Sometimes leasing equipment, instead of buying it, can be the best option for your business. However, there are many variables that should be considered, including costs, use restrictions, legal parameters, and othe...
Buying Text Links
	I've had several inquiries about whether or not they should invest in buying text links? Generally, my answer is why not?
Should you buy or start a business?
	If you’re thinking about starting your own business, there are always two options open to you – starting your own business or buying a business that’s already in existence. Each of these options has its pros and con...
Still wondering if search engines really matter in YOUR business?
	A recent study by Internet research firms Marketing Sherpa and Enquiro called, "The Role of Search in Business to Business Buying Decisions" strongly demonstrated that search engines are now the dominant force dri...

---

Related Forum Posts
	A few more questions to ask...
	My entry
	Relevant Marketplaces
	Re: Congrats Shri!
	Exclusive: Interview with Results
	Re: Teaching kids financial literacy
	Book Sales
	building a list