Starting a business anew or buy a company? For those thinking about starting a new business, the chances are that they’ve considered launching something from scratch by developing fresh ideas, researching a market proposition and building something from the bottom up. But starting in this way does present a number of challenges, such as the lack of an existing customer base, the marketing challenges of being ‘heard’ in a saturated market, establishing steady cash flow and hiring staff, all without the benefit of an established reputation or track record.
Consider the Alternatives
Buying a company is something that most of us don’t consider. And yet it’s a less risky solution than starting afresh. By purchasing a business you take over an operation that’s already generating income and, hopefully, profits. It will come with a reputation, staff and an established customer base and have a position in the market. You won’t need to reinvent everything as long as a successful formula for running the business is already in place.
The Big Picture
There is the inevitable downside that purchasing a business costs more than creating a new one. However, financing is easier to come by as investors and bankers feel more at ease lending to or investing in a business with a track record. Additionally, buying a business can give you legal rights to copyrights and patents, which can be highly profitable in their own right. Of course, you need to be clear about what you are buying and weigh up the facts carefully – picking the wrong business may harm your finances severely if you find yourself faced with obsolete stock, high manufacturing prices, outdated processes and controls and resentful staff.
Taking a Strategic Approach
Firstly, think about what type of business will suit you. Look at an industry which you understand and are familiar with. Consider which business types will match your experience and skills and look at other factors too, such as size of business that you’re seeking in terms of number of employees and sales base. Then look at geographical region, assessing business costs and the labour pool in that area. You can then start looking in the ‘businesses for sale’ columns in local, trade and specialist press, or put your own ‘looking to buy’ ad in the press to generate interest. Network hard and put your contacts to use – they may serve you well.
Using a Broker
A business broker is another route to finding a suitable business for sale. Most are hired by sellers to find the right buyer and assist with the deal negotiation. They work on a commission basis – around 5-10% of the sale price – but the assistance rendered can often far outweigh the cost in terms of genuine value, particularly to first-time buyers. If you are confident in your approach and looking to manage your budget carefully, though, consider approaching a broker only at the final-negotiation stage.
Getting the Team in Place
Beyond that, you’ll need a support team made up of an accountant, banker and lawyer in place to manage the acquisition. They will help you during the due-diligence period, which ensures that the sale goes through correctly and the business been valued correctly.
Thank you for sharing the factors to consider when buying a company. I don’t have any plans yet but I guess you will never know.
This is a really informative post! I’m sure people who are looking into starting up their own business will find this very helpful.. 🙂 I personally want to have a business of my own, but I think I have no choice but to start from scratch since small-time lang naman ako and small capital lang.. ^^
i might be needing this in the near future. bookmarking 😉
Though I dont have immediate plans of buying a company. Who knows I might be needing these great tips in the near future. A girl can always dream.:)
Although I dont have any immediate plans of buying a company, who knows I might be needing this valuable tips in the near future. A girl can always dream right?! Thanks for sharing.:)
I’m bookmarking this as well! This could pose very helpful especially now that I’m thinking about potentially buying out my kuya’s former business service & concept.
Wow! I never thought that this is the big thing – buying a company. I’m dreaming of putting up a business and starting from scratch. But if I can buy a decent company right away, that would be awesome.
Oh, I would definitely love to have my own business someday! This would be helpful by then!
buying my own company sounds like a terrific idea, if only i have the means to do it, or maybe i can consider franchising! 😉
hmmmm… How i wish I could buy something like this 🙂 hehe.. bigatin na talaga ako kung nagka ganun 😛
Although I only seen thi on movie or soap opera buying a company should have an assesstment first or we need to consult some expert on that matter
GRABE!
so hard to start new business. so many things to do.
planning, organizing, staffing, directing and controlling people.
but this is very informative though…
Buying a business sounds so complicated. Here I am thinking starting from scratch is hard, buying one is just as hard too!
I’ve had 3 employers, unfortunately 2 of them were bought. it was hard for us to adjust with the new management and at the same time just accept what they have been offered. that’s why most of my colleagues just left the company.
Franchising is also good since they will come from already established companies and already have followers in the market. eg. jollibee,mcdo etc.