© 2019 by Malahat Valuation Group Inc.

Do you want to be the BOSS? Kick the 9-5 to the curb.

October 20, 2016

 

 If you think you have the chops to be an entrepreneur, but would rather not start with a new idea or just don’t have a new idea that can be commercialized, then you may consider buying an existing business. 

 

As the demographics tsunami continues to build there are many good companies being put up for sale and becoming available in the market.

 

While buying an existing business typically involves more upfront cost, it also presents less risk than starting from scratch.

 

  • Financially - you’re looking at actual sales, cash flows, and profitability records and can reasonably assess what the future may hold

  • Operations – are established, business know how and trained work force

  • Market acceptance - established customer base

  • Technology -  may include valuable patents, trade secrets, or proprietary equipment

  • Opportunity – unrealized potential to drive the business with new enthusiasm and into a new direction, its always easier to work with something established than starting from scratch

 

5 Basic Steps - How to buy an existing business

 

Now that you have decided to become an entrepreneur here are a few steps to move you forward in the right direction. 

 

1.Decide what you’re looking for

 

  • Location–  brick and mortar, mobile, or digital

  • Size -  small, family business, multi-location, or a large enterprise

  • Industry - consider your experience, passions, or hobbies 

  • Lifestyle -  consider business operating hours, travel requirements

 

2. Research available businesses

 

  • Speak with family and friends – you will be surprised what they might know about possible businesses for sale

  • Consider business that you frequent that may you like to own.  The current owner’s might be thinking about selling.

  • Put the word out to your business contacts and network

  • Do some online searches (be aware of scams)

 

3. Consider working with a business broker.

 

Business Brokers are paid on a commission and can be a good resource to do a lot of leg work for you while help you with:

  • Pre-screening,

  • Helping identify possible options, and

  • Negotiating the term if a business of interest is found

Word of caution brokers are paid on commission and only get paid when you complete the deal so don’t let yourself get pushed into a hasty decision.

 

4. Complete your due diligence.

 

Before you get too excited, slow down and do your homework.  Make sure you understand the business, how it functions, how it generates cash flow, and drives its expenses.  Identify areas that you can improve to increase the return on your investment.  Identify the issues or blemishes, every business has them, and make sure they are manageable, factored into your price and business plan.  Have a look under the hood, kick the tires, go for a test drive and get a:

 

  • Business valuation – know what the business is worth Have an independent business valuation performed to determine how much the business is worth, and consider how the current owner’s connections, operation policies and expertise may affect that value

  • Analyze the financials -  have a CPA review done to ensure there is not creative accounting policies obscuring the real picture

  • Scrutinize the operations -  HR, machinery, inventory, suppliers, and the customer base

  • Assemble a acquisition team – hire a corporate lawyer, accountant, and possibly a good business/commercial banker.

 

5. Draft the sales agreement

 

You’ve chosen a business, negotiated the terms, the next step is to draft a solid agreement and sign on the dotted line. 

 

Sweat the small stuff now!This where your corporate attorney plays a integral part to ensure you are protected, the deal is completed, and there are no misunderstandings that may derail the transition.  Sweat the small stuff now!

  

 

Malahat Valuation Group

Tel. 1-250-929-2929

www.malahatvaluationgroup.com 

Please reload

Recent Posts

December 5, 2019

Please reload

Archive
Please reload