Starting a business is a daunting task for many reasons. That is why many people often resort to investing in franchise opportunities or buying existing businesses. However, buying an existing business has its challenges. Knowing the pros and cons of acquiring a business will make the process easy, hassle free and legally binding.
Where to Find a Business for Sale
The best place to find businesses for sale is the classified ads section on local dailies. Weekly, monthly and quarterly publications also contain businesses for sale. Nowadays, however, these opportunities can also be found online. Fortunately, there are many websites containing classified ads. There is usually a “Business for Sale” category in classified ads. By clicking on this category, you can find the exact type of business you are looking for. You will find everything from bars and clubs to restaurants and taxi businesses for sale.
Guide to Buying a Business
Every business has assets and liabilities, so it is important you look at the financial statements before committing yourself. A business may seem like a great deal but an in-depth look at the finances may reveal some major discrepancies in the business. Be sure to ask the seller about:
i) Existing Debts
Before you buy a business, you must first find out if you are buying an excessively leveraged business. After all, you do not want to find yourself with a pile of debt when ownership is transferred to you. Ideally, the seller should quote a price that takes into consideration the outstanding business debt, or settle the debt before selling the businesses.
The annual rent paid for the business premise is also a crucial factor of consideration. Be sure to ask about the rent as well as the terms of the lease. The rent per square foot should also be competitive.
iii) Total Assets
Before buying a business, you should ask for a complete list of assets, including; vehicles, stock certificates, bank balances, unpaid invoices, cash at hand and inventory among other things. Furniture pieces, stationary and office equipment as well as any other type of machinery should also be accounted for.
The price quoted by the seller will most likely be inclusive of goodwill. Most sellers will quote a price that is well above what the business is worth so be sure to ask about the value of goodwill the seller is asking for and try to negotiate.
v) Brand Name
When buying a business, you may also want to own the name and logo of the business, so be sure to negotiate a suitable deal with the seller. Lastly, be sure to discuss the deal with an accountant as well as an attorney to ensure the acquisition is not only sound, but also legal.