Business Literacy For All-Buying A Business

It is very difficult to establish and run a business due to the frustrations one has to go through in the registration process and the hard time to come by startup capital. These factors cause most ideas to forever remain ideas that never materialize into a viable business. There is however a way out in owning that dream business you are yearning to own. The option is buying an existing business since it already has the structure, the employees and existing customers in place to kick-start your business. I must be quick to add that you should not decide to buy an existing business instead of establishing one because you want to avoid the hustle and bustle of setting up your own. You must investigate the industry very well to know the players in there, the market share your new company owns and how profitable it would be if you should buy it. Decide whether or not you are convinced to buy the business and you are ready to make a commitment to that effect. If you are convinced to buy the business, then start talking to the owners of the business and explicitly stating your decision to buy their company. Negotiate with the management of the company you are seeking to buy and seek legal advice throughout the negotiation period. If you are someone interested in buying already established businesses, then talk to business opportunity brokers, read classified newspapers and go for business opportunity trade shows.

Take a very close look at whether environmental and other laws in the industry or country where the business is and whether the business have always adhered to these laws. It is equally essential to check the track record of the management of the company you wish to buy. The management of the business you want to buy should be studied and known, though it’s difficult to assess, it is still crucial to the future well-being of the business. Assess the expertise needed to keep the business going, if present management leaves and you have to hire your own new team.
Technology, if the business is an industry, where it demands IT for it to make high profits, it should be considered whether it can sustain the ever-fast-changing industry and still remain in business for the foreseeable future.

In your decision to buy a business, you would be dealing more with experts like accountants, attorneys, bankers, equipment suppliers and vendors amongst other experts but always remember it is your decision to buy that business. Don’t allow any expert to decide for you. But what would be helpful is that you ask them relevant and specific questions that would guide them in their recommendation to you.
Furthermore, your decision to buy a business should be dependent on facts and figures, industry analysis and objectively evaluation the future prospects of the business considering both macro and micro economic indicators. Most of the above information can be gotten from regulatory agencies of the company you are buying.
There are source document that you can get from the accounts department of the company you are buying. Certain documents like the balance sheet, cash flow statement and income statements should be checked. Do not forget to always ask for an audited financial statement. Ask for verification documents for their receivables, payables and other lines items in their financial statements. Ask for the seller's personal and business tax returns. In some businesses, you can determine the income by analyzing utility bills or supplier's records. You should be quick to find out if the company has a pending case in court and analyze objectively their chances of winning or losing that case. Also verify to see if there are some outstanding financial obligations the business owes to other companies and find out if they are retrievable or recoverable. This affects the value of the firm as this would help you arrive at the cost of buying the business.
Reasons why you buy an existing business
• An existing business may be the only way to enter the industry.
• Location is an important factor. In some communities, certain types of business can no longer be built and an existing business will be the only way to enter the industry. Proximity to your home will also be a factor.

Benefits to purchasing an existing business:
o The business has a track record of income and expenses
o Operating costs are often lower than in a new business
o The business will already have trained employees
o There may be true goodwill already built in
o The business may already dominate the market in the trade area
Now, you have an excellent idea of how to buy an existing business. Direct all questions, comments and additions to: skteye@gmail.com

©, Sophia Kafui Teye
Email: skteye@gmail.com