Buying a Business for the Right Reasons

existing-businessIf you are interested in buying a business that is up and running, you will have experienced employees, a recognizable position in the related industry, a defined customer base and operating systems that keep it running successfully.

Along with that, you will probably be able get a good combination of bank, seller and vendor financing at a time when the need is most urgent.

Also, when these various elements are present, you will have access to immediate cash flow, and the risk of failure will be reduced considerably.

As the new owner, you will also acquire the business’s name and location, the lease on the property is already negotiated, and the building is already constructed (if applicable).

Relating to your staff

When you buy a business that is up and running, having a staff of skilled, experienced employees who work together well is a definite plus.

However, scheduling interviews with the staff before you close the deal can vary widely.

As a rule, you will be permitted to meet with key members of the staff once it has been established that you are definitely going to buy the business.

Both the buyer and seller should take steps to ensure that this delicate process is handled properly because it is to their mutual benefit.

What you should know

A well-established business offers consumers a product or service that is in demand, which determines its position in the market and has a major effect on how profitable it will.

In this case, the company’s production, inventory tracking, accounting, sales and marketing, and payroll systems are already functioning.

Remember that customers have already established a pattern for relating to the business, and any changes that seem to be required when you assume ownership should be done gradually.

The seller, lender and vendors also become your business partners because they assume part of the risk in the venture. When buying a business that is showing a reasonable profit, financing from the seller is typical, usually at below-market interest rates. (Along with that, the security requirements of other arms-length lenders do not apply in this situation.)

If you buy a business that is a going concern, this will prove to be a source of immediate cash flow for you because the lenders will have a vested interest in seeing that it succeeds.

Information you should make available

Not surprisingly, your lenders have a right to know who will be your targeted customer base, the composition of your staff, how you plan on meeting current market demands, what operating systems you intended to use, how funds will be channeled, and the amount of risk involved in their investment.

What you should do

You must always be prepared to exercise due diligence when buying businesses, and creating a comprehensive business plan should definitely be part of the process.

If you feel that you will have difficulty in completing that necessary chore, consult with an accountant, lawyer, or other professional in order to get the job done.