Diriya

Planning to Buy a Business?

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Are you tired of working for someone else? Yes, you can always start your own business if you see the potential and a target audience where you can sell your product/service. However, before making this decision, set your objectives and think about where you see yourself and the business in the future. At this point it is important to decide whether you want to buy a business as a full-time job or as a part-time investment, or whether you should start your own business from scratch. Remember, what you put into the business is what decides the future of your endeavor. 

There are so many decisions you need to make while familiarizing yourself with the ins and outs of entrepreneurship. For some, it might be a little difficult or time-consuming to undertake the full effort of the entrepreneurial challenge of starting a business. For some others, having an autonomous operation is the preferred option, as they are looking to become part-time entrepreneurs. For people belonging to these two groups, acquiring an already established business is an ideal solution.

Yet, you SHOULD NOT buy a business without analyzing in depth its financial situation, and the existing market opportunities (even if you start your own business, it is essential to do market research and determine whether the business will be feasible in the long run). In order to identify these, an evaluation of the business is mandatory. Yes, it’s okay to trust yourself to make the decisions regarding buying a business or choosing a different business. However, consulting experts on the matter is always advisable.

There are certain parties that will help you steer in the right direction before taking a decision. Attorneys, Accountants, Bankers and other Business Owners are few of them.  For instance, if you consult an Attorney, they will help you review leases, contracts and other legally binding agreements and commitments. People like Personal Wealth Planners can advise you on whether you should buy the stocks or assets of the business. If you are planning to take a bank loan for this purpose, the bank personnel may support you with their knowledge. Hence, don’t hesitate to ask whether they could offer some consultation.

It is never advisable to use borrowed money as a source of equity funds unless you have reserves or means of paying them back if things go wrong – and are certain that the company will be able to generate enough funds for you to pay back the borrowings. If possible, go for either cash or liquid assets. This leads you to decisions regarding the financial sustainability of the business. When it comes to a new business/startup, there will always be some sort of financing involved in the form of capital. When you are acquiring a running business, you will still need what is termed as “Operating Capital” in addition to the initial down payment. 

It’s crucial that you carefully examines the seller’s financial statements and any other applicable records before you acquire a business. These documents are;

It is best if you could get professional help in analyzing the above documents, given that you are not an expert yourself. Once all these above documents have been analyzed, you can determine your expected net income. Also consider the possibility to expand the business operation, reduce the costs and increase the profits. This will enable you to decide on an offer. If you’re thorough with the above mentioned information and statistics, you’re good to go!

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