Looking to buy a business? Here are some things you should keep in mind before you do:
Begin with a bit of research. Before you buy anything at the market, you tend to find out a few things-like is it in your budget, is it value for money, its expiry date, the manufacturer, to name a few. Similarly, you need to find out about the history of the business; when it started, its future potential, why the owner is selling the business.
Find out more about the industry-its potential, the opportunities, and the challenges it poses.
Meet with the company’s founders and the management. Try and understand how their skills would help you.
Go through the financial aspects of the business. Have your accountant go through the company’s audited year-end financial statements, at least the last 3 years statements. It will give you a good idea of how the business has been progressing or declining.
After your accountant, get your lawyer to work.
A good study of contracts, agreement, and leases which the company has entered into, will give you an insight on how they’ll affect your takeover. Also, there would be some legal sanctions on the business like something related to the environment or trade; make sure you get a good grip on those. Make sure that if there are any patents, then they are in the company’s name, not the owners.
To make yourself familiar with the brand, get to know more about the company’s target market, the marketing tools and channels being used and the reach the brand has made in different markets. A detailed competitive analysis would also help. Analyse sales reports and understand the trends in sales. What has been the best time of the year for sales, the quality of the client base etc.?
And last but the not least the most important cog in the company-the employees. Initially, the relationship between current employees and new management is sour but things can change if you as the new owner are much more welcoming. Do acknowledge the fact that these employees have been in the company for a while, they understand the industry and market better, they know what has worked and failed before. So, use their experience to your best advantage. That way, they too will feel valued.
