Five Things to Consider Before Purchasing an Existing Business

business valuation meetingStarting a new business from scratch can be difficult for some entrepreneurs. Sometimes, it could prove to be a better strategy to purchase an already established company.

You will be saving time and money on setting up initial regulatory, branding and operational processes that any new business requires. You should also do serious research about the business you’re looking to purchase and negotiate a the best deal possible with the seller.

This is most certainly not a simple process, as there are numerous potential challenges ahead of it. We’ve selected five core considerations that are essential to someone who is buying an already existing company.

#1. Know yourself

A new entrepreneur needs to know what his innate skills and flaws are before running a successful business.

Knowing your previous experiences and growing a personal connection with the business are essential as it helps defining what needs improvement and how much time is needed to invest in it.

It’s always more exciting and motivating to be a part of something you believe in and have significant knowledge of.

#2. It’s for sale for a reason

It’s not uncommon for business owners wanting to move on and retire. However, sometimes there can be more to it.

Do your own research. Discover a bit more about their employees, customers and competitors. See if there are any struggles with the business’ public image, operational processes and the impact of a potential change of ownership.

This step requires you to speak as much as you can with the current owner, and everyone related. Only make a decision after expressing your concerns and doubts and getting meaningful answers.

#3. Go after comprehensive financial and legal information

This will require you to research even deeper and broadly than above. Ideally, you want to follow this step only after you’ve made your personal decision to purchase a company, as it requires additional time and financial resources.

Always hire trustworthy and credible accountants, attorneys, insurance and business brokers to make sure there’s no corner-cutting or potential irregularities in the pre-purchase analysis and the subsequent business transfer process. Working with professionals is the best way to hedge against potential investment, reputation, regulatory and operational risks.

#4. Negotiate

It’s natural that the buyer and seller have different views regarding how much the company is worth. However, with the assistance of a respectable business broker, you can have better leverage on the negotiation, and reduce tensions with a third-party mediator in between, who can also provide a thorough business valuation that will clarify what the company is worth in terms of current markets.

All details must be settled in the final sales agreement, primarily the final purchase price. Other important aspects, such as cataloging all assets, reviewing copyright and intellectual property information and up-to-date customer lists should be taken in consideration before claiming ownership of an existing company.

#5. Consider hiring a Business Broker

This should be only a brief overview of what someone should consider before buying a company. In reality, however, there are many extra and intricate details that can make the entire process more complicated and lengthier, especially if it’s your first time buying an existing business.

You should consider getting expert help on the matter. Dedicated professional business brokers can assist with the entire purchase process, from understanding what kind of business best fits your experience and expectations, to mediating negotiations to make sure you get the best price. With this, you no longer will have to worry about the small details and instead focus on the purchase itself, confident that a professional will take care of the rest.