A business owner generally sells his organization and hands it over when he or she becomes incapable of bearing its burden due to personal or financial reasons. These days smaller startups are trying to sell out their business in exchange of huge sums of money because they are unable to scale up.
When you are the buyer, just like any other haggler, you have to know the weaknesses and the strengths of the seller. This will give you a winning edge and help you in negotiating with the seller. Studying the market and comparing different buyable businesses is also necessary before you start the negotiations. In the following you will find essential tips compiled for your aid in this matter.
Go to the bottom of it
First and foremost you need to find out why the owner is looking for a buyer. How long the business has been running at loss? How much debt the business has incurred in the market? You must look at the sales reports, performance data and tax details of the business. Determine the true reasons behind the sale.
The sellers often lie about their true intentions in the hope of getting a higher price. Once you know the reality it will be easier for you to call the shots and decide whether to buy it at all or not. Also find out more about the business you are buying, its prospects of growth and the growth rate of the industry it belongs to.
Learn to read the signs of distressed sale
Several factors may be responsible for the seller’s decision to hand over the business. In most cases distressed sale happens when the business owner has reached the age of retirements and there is no scion to his or her legacy. Weakening financial condition can also be a reason of distressed sale in which case the buyer can negotiate a cheaper price.
Also find out how long the business has been on the market and if the seller has changed the offer price or not. Change in market conditions and legislative conditions can also lead to distressed sale. Sometimes the owners have a row between them which can lead to the distressed sale of the business. Be very cautious and measure your steps while going forward to buy a new business.
Are you ready for it?
Buying a business can mean additional responsibilities, especially if the business has lost its reputation and has been running in loss. If you are taking over a small business which has been doing well and want to scale it up even then there will be huge amount of responsibilities on your shoulder.
Before you proceed, just ask yourself if you are ready for this additional responsibility. Is your business ready for it? Are you financially stable enough? Is your personal relationships stable enough to handle additional time crunch? Think things through and only then take a rational decision.
Bad reputation can kill the chances of glory
Find out additional information if the business has been the scene of some type of crime or if the current owner has been less than honest. Also find out if the business has any easement issue or exclusive rights.
Do a thorough background check of the owner. Make sure that he had never been into any trouble with the government or state. The location of the business you are buying should not be hazardous. Also find out if any other organizations had raised its voice against the business you are buying. In the age of information technology it takes minutes to ruin a business’s reputation.
Buying a business is a way of expanding your own business. But, as a buyer you should find all the necessary information about the business you are buying and the seller.