Things Every Business Owner Should Know Before Buying A Business

In some cases, buying a business proves more successful and fruitful as compared to starting a completely new venture. When thinki...

  • Things Every Business Owner Should Know Before Buying A Business
    Manish Khanna Image Manish Khanna

    Things Every Business Owner Should Know Before Buying A Business

    • Wednesday 22nd of July 2015
    • Buying

    In some cases, buying a business proves more successful and fruitful as compared to starting a completely new venture. When thinking about investing in a small business, make a vivid evaluation of the fact that which is the most suitable line of business that you should invest in. When choosing from various alternatives, give preference to the one you are somewhere familiar with or the one which makes you feel contended, it could be a hobby, undoubtedly!

    After this, find out the reasons why the owner has set out his business for sale, if it was due to its inadequate performance, then don’t forget to sit down and evaluate all the risk factors associated with it and whether your planning will be successful to an extent that the business will become even more marketable or not.

    Next issue that needs to be addressed is “Funding” i.e., is the business financially feasible to you? Even if one opts for a loan, then the amount should be such that can be easily paid back as and when required. Apart from this, investigate the royalties, franchise fees, debts, lawsuits, tax liabilities associated with the business since when you will finally purchase the business all these factors will then be associated with its new and legal owner.

    Steps in buying a business

    • It is always better to hire a lawyer as he will be able to clearly explain all the terms and conditions as mentioned in the contract.
    • Once can seek the assistance of a business broker in this regard since a little negotiation here can prove to be very helpful in the future business run.
    • If you are opting for a loan, contact a banker in order to get the paperwork done a little faster.
    • After the successful payment and agreement, both the parties are required to finalize the deal and sign the necessary documents.
    • After all the above steps, you become the business owner exercising full control over it so even if you wish to change its name, license, ownerships transfer etc don’t forget to notify the public office for the same.

    Things to know before buying a business- A buyer’s perspective

    The first and the foremost thing to be kept in mind, don't waste your time on dealers who are not actually interested in selling their business. So always look for a potential seller!

    Rules for the buyers - The very first rule for the buyers is to analyse what you are actually looking for since buying a business is an extremely expensive as well as a risky deal. The second rule is that if you really wish to land upon buying the targeted business, remember there are other aspirants too this probably goes beyond the constraints like terms and prices. So, why should the seller sell his business to YOU only is another question that needs to be carefully addressed.The third rule is to be ready, ready in terms of finance, strong balance sheet, good banking relationships and so on.

    The steps that need to be considered in a business sale: -

    • If the broker is involved in the deal, then which side he is more inclined to i.e., which party pays him the commission? Apart from this, can both the parties use the same CPA so that a considerable amount of professional fees can be saved!
    • At what point will the confidentiality agreement need to be signed?
    • Will the deal be seller-financed wholly or partially? If the seller requests for a good faith cash, then will it be refundable or not? Etc.

    The fifth rule basically deals the legal issues like the difference between a stock sale and an asset sale and so on! Whereas the sixth rule encompasses the tax basics.

    Things and related pitfalls that one should necessarily know about starting an all new business venture

    The very first parameter that needs to be given great attention is the “Capital”, it is a very evident fact that most of the entrepreneurs either fail to arrange the right amount of capital for the business or they fail to find the right kind of customers may be due to the absence of apt management skills

    The most common pitfalls that need to be addressed and necessarily avoided: -

    • Every business person must make a clear evaluation of what kind of business that one is about to start with and how much affluence will be needed for the same.
    • When it comes to retail related ventures then the only thing that one needs to focus upon is Location whereas, when it comes to an entrepreneur that a supreme thing is “Research” i.e., having complete knowledge of who the customers will be and what are their expectations likely to be.
    • This proves to be a big pitfall for the aspiring entrepreneurs since they have no past knowledge about the particular field. So, the best solution for the problem is to seek the assistance of a mentor since he can help you to substantially save the profit earned.

    Advantages of buying a business over setting up a new one

    By clearly analysing the requirements of your business, you can opt to buy one since it will reduce the hard work needed to begin everything from the very scratch. Every business owner sells his business due to some reason or the other. Moreover, the buyers are too required to pay somewhat extra for an already established business. Though it accounts for many advantages like the risks associated with buying an already established business is lesser and you will be working in a market where the concept of the business is already established along with an adequate customer base.

  • Author Info Manish Khanna

    Manish Khanna is a serial entrepreneur, philanthropist and genuine Australian success story. In a decade he has built an online empire unlike any other. He is currently the Managing Director of more than 10 individual companies. These include the flagship Business2Sell which operates internationally in 6 countries. The others include CommercialProperty2Sell, Million Dollar Mansions, Netvision, BCIC Pty Ltd and Better Franchise Group, to name a few.

    With more than 21 years’ experience developing web applications plus very successfully creating, managing and growing start-ups, he is forging ahead to turn more of his innovative ideas into future success stories.