Are you going to start a business? Or looking to buy an existing one? Our verdict goes with the latter one. Buying a running business is much more feasible than setting up a new one. It’s easy in a way that you don’t have to put that much effort which you will put in a startup due to its established infrastructure and developed cash flow. However, it is tricky and can be daunting as well.
Here are some advices from NBR.com.pk business and property experts that will keep you from any hazards that come attached with the buying a business idea.
Go on Hunting
First of all, contact with a trusted listing expert or agent. Tell him your investment idea and your area of interest. A Listing professional will not only help you assert your requirements, but he will also help you to understand the market and location suitability of the area. But don’t rely completely on him and research yourself. Try online listing websites, search your required business and get some info from the people on the web., Don’t take decisions in a hurry. Just take a paper and write the pros and cons.
The Approach
Once you pass through what you are looking for, you’ll need to ensure the state of the business before you make an offer. This includes confirming that the business is generating good sales, not going into loss in any way, judge its employees, and the customer satisfaction and loyalty. Talk to employees, customers and others involved, such as suppliers. Contact the relevant industry association if there is one. For example, if you’re interested in a Shoe outlet, consult All Pakistan Shoe Manufacturing Association.
Perform a SWOT Analysis
It is essential that you perform a STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS analysis for your prospect business. Look for the positive impacts such as sales, cost reduction strategies, Inventory management system and ongoing cash flows generals. Suspect negative impacts that are affecting the business operations and sales such as employee dissatisfaction with the environment, policies, rules, pay structure and even with their job description. What’s the current and future demand for the business’s products or services? What about the competition in the market? Are there any new competitors emerging or looking to exit? Is there any development project that will affect business location in near future? Determine future opportunities that will help business grow and assess any threats attached to the business.
Check Legal Credentials
Make sure you review all aspects keenly. is the business system sound? It has adequate and legal documents, and is the cash flow sustainable. Confirm legal ownership of all key assets. This might include property, equipment, vehicles and intellectual property (such as registered patents, designs and trade marks). Is the ownership clearly defined in all cases? inspect for any past, current or pending lawsuits. Is there any liability on the business, any outstanding amounts to be paid to some bank or some person? Ask for NOC if business was financed ever by a third party. Look for a valid license of the business by relevant authorities or board. If it’s a food business, it has proper license to operate a food business by Pakistan Food Authority?
Pay Some Visits
For instance, it’s not a good investment to buy a café in a location where there are other food and beverage businesses failed. If the business is as wonderful as they proclaim, why they are selling it in the first place? Visit the business at different times, both announced and unannounced. It will help you assess the operations of the business and prevent you from being fooled by a fake customer traffic. In a same case, a buyer of a burger joint was fooled into believing the business was doing good because the seller invited friends for a free meal every time he knew the buyer was planning to visit the business.
Make an Offer
Determining the seller’s motives will assist you in the buying process. Is the owner under time pressure? Does the seller wish to sell just the trading part of the business or the property too? Does he really need money, moving to abroad or is there some unrevealed reasons, such as a competitor opening nearby or he is outperformed by an existing one? When you uncover the seller’s motivations, you’ll have an edge in the negotiation process. For example, if the owner has to sell within a certain time period then you may be able to quote a lower price. Making a lower offer and increasing it if required is always a better strategy than going in high at the start.
