Buying and selling a business

If you’re interested in buying a new business or selling your current business, it’s imperative that you are properly prepared. We look at the pros and cons of both.

TO BUY

The biggest appeal of buying a company that is already established, is that it is often easier and quicker to become operational than it is if you are starting from scratch. It’s vital that you inspect every aspect of the business before you buy it, as you want to find a company that’s right for you. The type of person who buys a business should enjoy the challenge of growing a company’s profits, rather than building it up from nothing.

The pros:
– All the hard work of getting the company operational has already been done
– Problems associated with start-ups will be resolved in an established business
– There is an established customer and supplier base
– Staff will already have experience, training and knowledge
– Proven policies and procedures will be in place
– Finances are usually easier to arrange with an existing track record
– The company will already have a business plan
– Profits are attained sooner than with a start-up

The cons:
– A large initial investment is needed to buy the business
– There are costs to pay for the business transfer
– You may inherit disgruntled staff members
– Customers may terminate their business because of new management
– An established company may need a cash injection to fix problems
– Changing old policies and procedures may be a challenge
– There could be existing contracts that will have to be honoured or renegotiated
– It takes time and patience to make the business your own

TO SELL

There are many reasons why people sell their companies: it may be time to retire, you could be relocating, the company has outgrown your skillsets, your family have no interest in taking over, or you want to start a new project. Whatever your reason it’s important to think carefully about selling as it’s a major life and financial decision. While selling your business can be emotional it is most certainly irreversible.

The pros:
– Frees you to pursue other interests
– The opportunity to start a new business venture
– It generates liquidity
– Financial security for you and your family
– Allows you to diversify your personal finances
– You can structure a deal to remain involved in the business
– The company may have the opportunity to grow bigger and faster
– The opportunity to focus on personal and family life

The cons:
– Entrepreneurs become bored quickly if they have no other immediate plans
– The negotiations are complex, extensive and time-consuming
– Lengthy negotiations take you away from daily operations in the business
– A non-compete agreement may have to be signed
– You may have to finance a portion of the transaction
– Direct access to cash flow ceases
– You may not receive the value you want for your business
– There will be uncertainty about the future of your valued employees

Whether you buy or sell a business it’s important that you don’t rush your decision. Plan your strategy and have a clear goal in mind that you can work towards, in order to achieve the most favourable deal possible.

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