What to consider when buying a business?

One of the ways to boost the financial and professional growth of any entrepreneur is to invest in a new business. Buying a business is one of the ways to achieve the goal of developing a career in the business industry. 

However, making the decision of buying a business is not a matter to be taken lightly. There are many factors that must be taken into account; the advantages, disadvantages, future projections and even the possible risks involved in making the investment must be evaluated. 

When putting a business up for sale or intending to buy a business, it is important to have the advice of experts in the area of finance. These professionals will have the ability to carry out a valuation of the company and provide the client with a detailed report. 

Broadly speaking, the information regarding the state of the shares and assets of the business will be studied in detail. This will define whether or not it is worth thinking about buying a business or under what conditions it would be beneficial to acquire it. 

One of the most effective techniques to enhance the visibility and attractiveness of a business for sale is the creation of a Pitch Deck. Likewise, when buying a business, having a concrete and clear overview of the business concept will be useful.

Buying a business: the step-by-step process

Now, it is true that the valuation of companies is one of the most important steps, but there is also another series of steps that must be followed at the moment of making a definitive decision of buying a business. 

There must be clarity regarding the means of financing you will use, a review of contracts and purchase and sale documents, a verification of the intellectual property of the brand, an examination of the inventory budget, among other things. 

By being careful and taking the time to review each transaction to be made, you will be preventing such things as:

• Tax penalties by determining the fair value according to regulatory standards.

• Mistrust when negotiating the purchase or sale price of your business.

• The tax impact of a purchase or sale of assets or shares.

You will also be ensuring that you accurately know the potential return on an investment and that the business valuation prepared by a counterparty is justified.

Review market supply

Before starting, it is important to be clear that the process of buying a business can be a lengthy one. It is important to be patient, be consistent and be willing to consider all kinds of alternatives and offers. 

In this first stage, it is also essential to be clear about what type of business for sale you want to acquire. Are you buying a small business or a big company? The filtration of the search will depend on these expectations. Ask yourself what type of mission; vision and values are a priority for you in a company. 

Once you have a list of options that best suit your needs and preferences, you need to learn about all that is involved in becoming a business owner. It is recommended that you study issues related to taxation, regulations and valuation of assets and liabilities.

Discuss the mode of financing

Are you still wondering how to buy a business? Do you want to become an entrepreneur? Do you intend to buy a business with no money down? It's all a matter of negotiation. In some cases, sellers will accept some means of payment and refuse others. Others will be willing to listen to you and negotiate with you.

Of course, you cannot arrive at a meeting empty-handed. You must be clear about your budget, evaluate and suggest different alternatives to cover expenses. Even be honest about the losses or bad times the company has had, but don't forget to propose solutions. 

In many cases, start-ups begin their development with the strategy of attracting investors. However, there is also the possibility of thinking about bank loans or governmental calls for the support of ventures.

In any case, before buying a business, regardless of the means of subsidy to be used, a brief and direct concept of the potential of the business should be established. 

Presenting realistic data through creative and strategic pitches will be the key to gaining the approval of many investors. What are the company's short, medium and long-term goals? What is the company's licensing status with respect to national regulations? How is the company positioned within the industry?

Document transactions

Finally, regardless of the type of business and the financial magnitude at stake, a contract should be constructed with the advice of professional and experienced lawyers and accountants. This will ensure the security of the process when buying a business. 

Sometimes, in order to avoid lengthy procedures and save time and effort, people avoid all types of procedures, protocols and payment for expert services. This can jeopardize the negotiation and may cause risk factors to be overlooked. When buying a company, you need to be aware of everything. 

In addition, it is advisable that all individuals who are part of the board of directors be present at meetings and decision making when buying a business. This will avoid future inconveniences or misunderstandings with the company's leaders. 

At Zen Valuations, we offer specialized financial consulting support in any region of Canada. If you are planning to buy a business in Quebec, for example, this is the right place for you. 

If you are interested in this type of topic, we suggest you read the following article of our blog: Redundant assets (liabilities): what are they?