Instead of building a new business from scratch, some entreprenours prefer to buy an existing business. This way they become the owners of a brand that is already notorious on the market, a client portfolio and a guaranteed revenue. If you want to find and buy a profitable business, you should take into consideration some important facts.
Choosing a company that is for sale
First of all, if we are talking about a franchise, the first thing you need to do is looking for real estate properties for sale. Second of all, when you want to buy an existing business, the choice you make should be based both on your instinct and the recommendations of specialists.
The criteria that you need to take into consideration are: political, economical, social, technological and environmental. You also need to analyze the market growth prognosis, the level of competition in the industry and the power of negotiation of the suppliers and the customers.
The business you want to aquire should be chosen depending on the industry is part of, the budget you are willing to spend and the potential for profit. It’s mandatory to know the business you want to buy. You won’t be sucessful if you have people that work for your you but you don’t know how to manage them. Look for businesses that are part of an industry that has potential for growing so you can recover your investments and begin to make profit in a couple of years.
When is the right time to buy an existing business?
If it’s a seasonal business, it’s better to buy it in off-season because that is the moment when the prices are lower. But in this case, you should be suspicious. Why is it for sale in off-season?
If it’s not a seasonal business, then you should aquire it after its evaluation. You need to make sure it’s not a bankrupted business. The time of the year doesn’t matter that much. If the business works good, than the investment is less risky than in a new business.
Advantages and disadvantages of buying an existing business
Buying an existing business is safer because you already have a functional business model and a name on the market. But if the company has a negative image, it will be difficult to change the perception of the customers or business partners. It’s easier to build a business from scratch than “cleaning” a brand with a negative image. But some would say that the image of the brand doesn’t count as match as the fact that it is a brand and therefore, it is known.
One important advantage of buying an existing business is that you are no longer exposed to that start-up risk. But that doesn’t mean you are safe from any risk. You can ruin everything if you have a bad management strategy. If you implement an efficient management and you’re capable of running the business as the previous owner, the risks are significantly lower.