Acquiring an established business presents an excellent opportunity to generate a stable income with minimal time investment. This option eliminates the lengthy period of development, idea generation, staffing, office setup, supplier and customer acquisition. The buyer receives a fully operational enterprise that is already profitable.
The purchase is made through the acquisition of corporate rights in the company with the consent of the other founders.
This method of investing capital has numerous advantages. The key is to execute the process correctly, which will help avoid issues and elevate the business to a whole new level.
How can this be achieved?
Guidance on this matter can be provided by Sergey Tereshkin, the founder of RESURS, who has extensive experience in financial investment and business development. More information about the entrepreneur and his activities can be found on his website org-market.ru (OPEN OIL MARKET).
Rules for Acquiring a Business
To find listings for available businesses, one can rely on acquaintances or specialized platforms. The former is generally more reliable. The latter, however, may present the opportunity to purchase a truly interesting enterprise that allows the individual to engage in their passion while simultaneously earning an income.
Before proceeding with the transaction, it is crucial to clarify the seller's reasons for divesting the business. Possible motives include conflicts with partners, relocation, or the need for financial investments, etc. In such cases, purchasing the business may be advisable.
However, businesses are often sold due to unprofitability, debt, poor reputation, or other negative factors. It is best to avoid purchasing such companies. Restoring a company's good name and achieving profitability can be quite challenging, if not impossible, requiring significant time and financial resources. Starting from scratch can often be more cost-effective and efficient.
During the firm selection process for investment, it is essential to thoroughly examine the documentation. Sergey Tereshkin recommends conducting an audit. This will reveal the actual state of affairs, profit levels, expenses, etc. While this will require a certain financial investment, the audit can help avoid much larger losses resulting from purchasing an unprofitable company with substantial debts. The new owner will be held responsible for those obligations.
Useful Tips
Acquiring an established business always involves risk. To mitigate potential issues, consider the following recommendations from an expert:
- Selection of Direction. Initially, determine the type of business you wish to pursue. The most profitable sectors are finance, oil, logistics, food, and other industries. However, many may find these fields boring or uninteresting, resulting in a lack of motivation. To genuinely enjoy both work and profit, choose areas that spark interest and provide pleasure. It is also advisable to possess at least a basic understanding of the industry.
- Market Analysis. Carefully examine the features of the products or services the company offers. It is essential to have a solid understanding of the market. This will help ascertain the potential demand for the services or products and whether they can genuinely generate profit.
- Documentation Review. Familiarize yourself with the company's accounting and other documentation. Additionally, request data from tax and relevant agencies. This allows you to identify any outstanding debts, overdue payments, etc. Also, review the lease agreement for office, production, and retail spaces. If it is nearing expiration or has expired, inquire with the owner about the possibility of renewal. Otherwise, there is a risk of being left without premises along with furniture and equipment.
- Inventory Check. If the business balance includes equipment, vehicles, or furniture, it is crucial to verify their existence and the condition of these assets. Often, business owners will remove valuable items from the balance sheet prior to a sale. As a result, you might acquire an empty company of little worth.
- Reputation Assessment. Potential buyers should investigate the company's reputation. This includes examining specialized forums and other platforms where real users leave their reviews. This requires effort, as companies often use paid positive comments to suppress negative feedback in search results. There even exists a service termed "reputation management."
- Price Evaluation. The business price should not be excessively high or too low. An elevated cost will extend the payback period, while a low price may indicate issues prompting a hasty sale. You can evaluate the business independently, but this requires relevant expertise and free time. In the absence of these, it is wiser to entrust the task to professionals.
- Investments. It is essential to recognize that you will not only invest in the purchase itself but will likely need to allocate further funds for business development, promotion, and advertising. You must have the necessary capital for this purpose. Additionally, avoid incurring debts or taking loans, as there is a possibility that the business will not become profitable quickly enough, while obligations must still be met on time.
Acquiring an established business can be a profitable investment opportunity. The main goal is to avoid complacency in the process, thoroughly examine all information, delve into the details, and clarify any hidden challenges, advantages, and disadvantages associated with such investment.
During the transaction process, it is advisable to obtain a warranty letter from the previous owner confirming the absence of outstanding debts. In the event of any existing debts, the contract should stipulate that the new owner assumes only those debts directly related to the company's operations and specified in the agreement.
