Know It All Before You Buy A Business
You must have often heard people saying that buying an existing business is better than starting one from scratch
. Well, I agree with the belief. Investing your capital in a fresh business where you would have to frame a plan, obtain resources, hire employees, create advertising policies and implement them etc. involves a lot of risk. You would face a lot of challenges.
However if you buy a going concern business it offers you a well established customer base, plans and policies(which you can amend any day), a good name in the market, employees who are familiar with the business operations and performance and a security that the business has the potential to survive in the market.
So, if youre convinced with the argument of buying an existing business, let me take you a step forward in buying one. Identify your nature and potential to carry a particular business, look for alternatives in the market. You can search online or take help of a broker.
Any individual who would invest huge amount of capital in a venture would not do it without analyzing the prospect from every angle. You need to do the same. There are certain things that you must consider before buying a particular business.
It involves the following:
Financial Status
The financial health of a business decides for its tenure in the market. The financial stability and profitability of a business help it run successfully. While you think of buying a business check the following details:
1.Balance sheet and profit and loss account of the past few years, preferably three to five.
2.Income tax returns, taxable income and profits for the last three to five years.
3.Cost of assets and liabilities
Business Environment/ Market
Business environment refers to the uncontrollable factors that affect the business. It is really important to understand the key features of the business environment. The market is governed by these factors:
1.The basic thing is to look at the potential of the industry your business attributes to.
2.Location of the business, feasibility to customers and cost of delivery of raw material from suppliers and products to customers.
3.Competition in the market and how can you survive it?
Resources
Resource refers to anything that is of value to a business. They have two major features:
1.They are scarce
2.They have multiple demands and usage.
Thus, you must use resources judiciously. It is important to understand the key point that human resource is the most important of all because they alone have the potential of putting other (natural or man-made)resources to use. The things you need to check on account of resources include the following:
1.Sources for obtaining raw materials
2.Status of building, land (lease renewal) and equipments.
3.Labor
4.Personnel competency and compatibility
You must keep an eye over the developments in the process of buying the business for sale. Checking the authenticity of the seller is of utmost importance.
The process should comply with the government rules and policies that govern the process of sale.
Your hard work will pay you off well in getting the most profitable deal.
by: Pearl.S
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