The 5 keys to a successful business purchase

By Vishal Bharucha, President of VNB Business Brokers, a leader business brokerage and M&A advisory firm.

Entrepreneurs these days are choosing to buy existing businesses rather than building their own from scratch. Acquiring an established brand is like running a well-oiled machine – an easier effort to capitalize on growth than starting from scratch. However, although the risks are considerably lower, several factors still come into play in determining the success or failure of your business, and buyers should always remain aware of these factors before purchasing.

In an interview with the U.S. Chamber of Commerce, Tim Conn, co-founder and president of Image One Facility Solutions, notes that half of all businesses are doomed in their lifetimes. first five years. In a study conducted by the Bureau of Labor Statistics, about 45% of businesses decline in this time frame. It's a reality check for all buyers, because those formative years are crucial: every step must be precisely calculated and every decision made must be well-informed.

Let's look at five keys to success that every marketer should know before buying a business.

Find the right sector

The first step is to find the sector that matches your goals and interests. Your niche and experience are important because they determine your ability to operate a business effectively. It's not ideal to spend the majority of your time learning about the industry; this is why it is important to have a certain level of insight, experience and understanding. With sufficient knowledge and relevant skills, you will be able to make sound decisions regarding your business operations.

Due Diligence

The business buying decision-making process is not a one-person job. You will need a team of experts to verify the information and guide you through the process which you may not be familiar with. Getting help from certified accountants and attorneys to ensure that all legal documents and tax reports are up to standard is a requirement, not just a recommendation. You will also need a financial expert to analyze and validate the company's financial report so that you can assess the feasibility and growth potential of the business you want to buy.

There is a documentation repository that your business broker must present to you. These include marketing materials covering relevant aspects of the business with the aim of providing you with an overview of what is on offer. As the sales transaction moves through its various stages, bank statements, supplier contracts, tax returns and rental agreements should be made available to you as the buyer.

The art of making an offer

Learning the art of making an offer can have a big impact on the success of a business sale. The key to an effective offer lies in proper negotiations, which are highly dependent on compromise. Try to make room for concessions that don't matter to you but mean a lot to the seller. This can not only help build lasting relationships, but also help you avoid future conflicts. Your trading broker should be experienced in trading and guide you through these steps.

Keep in mind that the goal is to reach a mutual agreement, so both parties should be equally happy. The key is to be flexible with your terms and to be open to suggestions. State your terms, but be prepared to compromise if necessary.

Be realistic

While ambition is a vital aspect of acquisition...