5 Most Important Things to Consider When Buying or Selling a Business


Every person has big dreams and owning a business is a realization of a dearly held dream. Starting a business a business from scratch is an idea for a novice entrepreneur. It involves choosing the best location, what to sell, whom you will sell to and where you will buy from. Its success requires a good idea with the potential to exploit the market or the new markets. It takes a lot of hard work, approval for credit terms is difficult since you have no performance history and no security to offer.

When Buying a Business

Meanwhile, buying an existing business is not risk-free but offers a lot of advantages. The risk of failure is smaller provided you purchased at the right price. Buying an already established company is appealing because it is less expensive than attempting to start up a new business. You already have an established market, with a customer base and suppliers will offer credit lines. Other benefits and advantages include:

• An established customer base;
• Established location;
• Easier to handle and manage from the beginning
• Comes with inventory and machinery

Here are some simple guidelines for finding the right business for you:

• You must know the business. You have to choose the type of business in which you like or interested in and it is best that they have prior knowledge and experience in that area. If in case you don’t have the experience, you need to hire people whom you trust who knows the chosen business and you have to make an effort to learn everything as quickly as possible. Statistics show that business owners tend to be more successful in the line of business which they are knowledgeable of.

• Knowledge of the business you are planning to buy. You need to have as much information as you can about the business, before deciding to buy. Study and review the government rules and regulations that directly affect the business. It is important to have knowledge of the present market conditions, and how the business fares in this market scenario. Business licenses and permits must also be checked.

• Understand why the business is on sale. It is important to understand the reasons why the business owner is selling the business. While the owner may decide to sell due to personal, retirement, relocation or other reasons, be careful if the owner is selling the business due to financial considerations. The buyer must thoroughly research the company’s financial history, before making an offer such as contracts with other companies, past lawsuits, business leases, employee files, and benefits. You have to dig deep and talk with the employees, suppliers, even customers to get a better sense of how the business is doing. Most sellers will not tell you the real reason especially if they want to get rid of it. If the business is not making money it could be due to mismanagement or due to shrinking marketplace or a dying industry, then buying the business is not a good idea.

• Consider your Budget. Your budget also plays a crucial role when looking for any business for sale. The business you select will depend on how much money you bring to the table. Get a good idea of your budget range. Explore possible funding sources that you can tap

• Ask for advice and help. Buying and negotiating a purchase is a complicated process. You need to have a lawyer who can advise you, and an accountant who can help you evaluate the value of the business.
  The key to success in buying an existing business is to do a thorough research and determine whether the risks are manageable.

When Selling a Business

When deciding to sell your existing business, you need to be ready to commit to organizing all your financial documents and getting the company in order. Also, you should make sure that the company is not currently facing any legal problems or is at risk of being sued any time soon. That way, there will be no major disruptions during the transfer of the company from one owner to another. Buyers are looking for business attributes which attract them such as:

• Increasing profits
• Consistent income figures
• A strong customer base
• A major contract that spans several years

However there some considerations to help sell your business:

• Reason for the sale. The common reasons are retirement, partnership disputes, illness or death, becoming overworked, or boredom. A business which struggles financially is harder to market.

• Plan and prepare for the sale. Business owners must improve first the financial status of the company and make more profit. Update and organize the financial records of the company.

• Value the business: The value of your company can be determined by the financial status (profits, etc.) of your company and the reputation. The appraiser’s detailed explanation of the business's worth will bring credibility to the asking price and can serve as a gauge for your listing price.

• Advertise the sale.  When your company is for sale you can market it yourself to save money. However, hiring an agent can help free up time for you to keep the business up and running, or keep the sale quiet and get the highest price.

• Find a buyer. When you already have few potential buyers, stay in contact with them and pre-qualify every buyer so that the company you established will not be put to waste. Negotiate wisely and stand on reasonable price and agreements must be put in writing.

Selling a business will require much of your time and, once sold, you'll need to determine some smart ways to handle the profit. It could be opening another business that is far better and certainly, that will ignite your interest and entrepreneurial spirit.