Things that Buyers should consider when Buying an Existing Business

  • Where to find a business on sale

Some businesses are advertised through print ads. If you’re looking for a business situated in a specific location, for example Toronto, you should be looking at local newspapers and trade magazines to have a selection. You may also visit online marketplaces like Selling a business in Toronto to look for listings of Toronto-based existing businesses.

You may also consult a broker who has a wide network of connections and list of prospective businesses that might match your interests.

Build networks in corporate events to inform important people in the industry that you are planning to purchase a business.

Conducting due diligence is a must since some posted business on sale may be misleading.

Selling a business in Toronto

  • What kind of business should you consider purchasing

What’s good about an existing business is that it already has established its presence in the market. Plus it already has a steady revenue stream. There are two types of existing businesses; both have their own pros and cons:

  • Franchise – what’s good about franchises is that they already have a business concept that is already accepted by the market. It also has already an established customer base. The head office usually provides support and training. But you have to abide by the set rules and regulations by the parent company, leaving you with less control over your business.
  • Independent business – As for independent businesses, you have more control over the operations plus you don’t get to pay any fees. Every cent earned from the business is all yours.This type of business have more opportunities but also more risks. You may work on the potential you see in it and benefit from the success afterwards. But you also have to be prepared if things won’t turn out as planned.
  • Evaluating a business

In assessing a business, you must consider look into the physical location of the business. Check if the office, warehouse, plant, or store is in good condition? Are the equipment and fixtures in need of repair or are they well-maintained?

You also need to know if it’s highly visible and accessible to your target market, given the location. It may not be profitable in the end if you will still incur additional expenses just to reach your clients.

Know if the business has a good image. You may want to read online reviews of customers to see how they perceive the business.

Do the products and services that the business is offering generate revenue? What is the sales trend? Is it on an upward trend or is the sales performance declining?

It’s also good to examine if the business have good connections with the suppliers and bank.

If the business is seen to be delivering a poor performance, know the causes. It might still be possible to give it a turn-around, banking on the foreseen potential.

It’s also highly important to know why the business is being sold

  • How much should be paid for the business

Value of the business is determined by the value of assets, financial records, and other valuable assets like reputation, customer base, and quality of staff. Check all these important details during the due diligence. It also pays to talk to customers and other parties that the business is engaging with, to know the reputation of the business. Existing businesses are usually more costly when compared to the needed capital for a start-up business due to goodwill.

  • Other considerations
  • Do not rush when verifying the data gathered about the business.
  • Consider buying a business from an industry that you are familiar with and have products and services that you know how to market.
  • Your purchase must be based on the return on investment and not on the price. Your capital must be returned through profit over time.

Scrutinize the suppliers and the clients that the business is engaging with and the reputation of the business itself.

Post Author: Jennifer Slegg