Things To Consider When Buying An Existing Business

Some people specialize in starting businesses from scratch, while others are more attuned to the task of buying an existing business and turning it around to reach new heights under their stewardship.

If you’re looking to get into the latter camp, then there are a few points to take into consideration when weighing up which established companies are worth purchasing.

The Motivation Behind The Sale

It’s reasonable to ask the current owner why they’re selling the business, and there are plenty of legitimate reasons that shouldn’t be seen as red flags.

Often this happens when the time for retirement arrives, or when founders have become burnt out by the process of wrangling a company and are looking for a slower pace of life. It may simply be as a result of the owner wanting to move onto the next challenge, having achieved what they set out to.

There are some explanations which pose a bigger risk to any prospective buyer, which we’ll tackle a little later.

Your Reasons For Buying

Another thing to explore is what’s driving you to buy an existing business, as you need to know this in order to determine which firms are a good fit for your objectives.

For example, if you’re intending to buy a business in the US in order to take advantage of the EB5 visa scheme, there are stringent requirements to meet. You’ll have to do significant restructuring or expanding an established business in order to qualify. Sites like https://eb5visainvestments.com have all the details you need.

Brand Reputation

It should go without saying, but a business will stand or fall based on its reputation. So don’t just look at sales stats and assets when assessing an organization’s worth, but also take how it’s perceived by customers and competitors into account.

If a business has a good reputation, you’ll need to work to maintain it once you take the reins. If its reputation is in the doldrums, you’ll have to fight to turn things around.

Employee Retention

Buying a business means taking charge of any employees that are on the staff. Whether you plan to retain all team members, or only some, it’s your responsibility to consult with them and keep them in the loop regarding the decisions you make.

Settlements and compromises are a legal requirement, and it’s best to stick to what the regulations set down in this regard, or else you’ll land in hot water and could be subjected to a drawn-out process of disputes with former employees.

Market Conditions

It makes little sense to buy a business which caters to a market where there’s little demand for the products or services it provides.

At the other end of the scale, if a market has healthy levels of demand but there’s stiff competition from larger brands, it can be equally unwise to invest, unless you’re particularly confident in your capabilities as a leader.

Doing your research and considering not only the broader market conditions, but also the state of play in the location where the business is based, will stand you in good stead.

Debt

Having debt on the books is not an intrinsically bad thing for a business, but has to be accounted for by any would-be owner of an existing company.

Some firms are sold specifically because they are struggling with debt, so you need to know about this state of affairs and understand the risks involved.

Equipment & Other Assets

Buying a business means taking ownership of its assets, which can include heavy machinery, manufacturing gear, product inventory, property, land, and more besides.

A business which has significant assets that are more than capable of offsetting any debt liabilities could be more appealing, for example.

Final Thoughts

The opportunity to take over an existing business and either continue to manage it well if it’s already successful, or turn it around if it is on the ropes, is one which appeals to a lot of entrepreneurs.

It’s also a step you shouldn’t take without careful consideration, and without prior experience of leading teams and handling high level business decisions, because beginners will easily get overwhelmed by all of the responsibilities which fall to them as business owners.