Buying an Existing Business: Advantages & Disadvantages

1. How to acquire a UK business

Buying a business isn’t always straightforward. You might think you know exactly what you want, but you don’t really. If you’re thinking of buying a business, here’s how to make sure you find the best deal.

You’ll probably want to do some research before you start looking around. Start by asking yourself questions like: What am I looking for? Where do I see myself in five years? Do I want to work for myself? And most importantly, why am I doing this?

The first thing you’ll need to decide is whether you want to buy a business outright or take over an existing one. If you’ve got cash to spare, buying something outright makes sense – you’ll save money in the long run because you won’t have to pay interest on loans. But if you’re short of funds, you could look into taking over someone else’s business. This way, you’ll already have a proven track record and customers.

Next up, you’ll need a plan. A good place to start is by writing down everything you want from a business. Think about where you see yourself in five years. Are you hoping to become a successful entrepreneur? Or maybe you just want to earn enough money to travel the world. Whatever you’re aiming for, write it down. Once you’ve done that, you can move onto deciding what type of business you want.

There are three main types of businesses: franchise, PLCs and sole traders. Franchises are owned by companies such as McDonald’s, Subway and Starbucks. They usually offer support and training, but you’ll still need to invest in marketing materials and advertising. PLCs are limited liability companies, meaning that shareholders aren’t personally liable for the debts of the firm. Sole traders operate under the same rules as partnerships, except that partners are individuals rather than corporations.

Once you’ve figured out what type of business you’d like to buy, you’ll next need to identify potential candidates. Start by checking online directories for small businesses. These include Business Link, Local Enterprise Office Network (LEON), Directories Online and the National Federation of Small Businesses (NFBS). Alternatively, you could ask friends and family members for recommendations.

If you’re lucky enough to live near a city centre, you could try contacting local chambers of commerce. They often publish lists of local businesses for sale. Finally, you could check newspapers and magazines for advertisements.

2. The pros and cons of purchasing a business

Buying a business can be a great way to start a career, but it does come with some risks. If you buy a small business, you’ll probably have to do a lot of administration yourself. But you won’t have to worry about paying tax bills, managing employees or dealing with suppliers.

You’ll also have to make sure that the business is profitable before you invest. And you’ll need to make sure that you know how much it costs to run the business, otherwise you could find yourself spending too much money without getting anything in return.

If you buy a larger business, you’ll have access to bigger budgets, but you’ll still have to manage things yourself. And you’ll likely have to deal with the same issues as a smaller business owner.

The advantages of buying a business are obvious – you’ll save money on taxes, and you’ll avoid having to pay rent. But you’ll also have to commit to running the business for a set period of time.

And if you buy a business that isn’t already generating profits, you’ll have to figure out how to turn it around. So you’ll need to develop a strategy to increase sales and cut costs.

A business plan is essential to helping you decide whether buying a particular business is right for you, because it helps you understand exactly what you’ll be committing to.

3. Choose the firm to acquire.

If you want to purchase a small business, it helps to know what types of businesses sell well in your market. You can find this information online by searching for “business directories.” These sites list businesses in alphabetical order by category. They include everything from restaurants to auto repair shops. Searching for “small business directory” will bring up many options.

Once you’ve found a few listings, check the prices listed next to each listing. This gives you an idea of how much money you could make if you purchased one of those businesses. If the price seems reasonable, consider purchasing the business.

Don’t limit yourself to just the businesses located near where you live. Many small businesses operate nationwide, so you might be able to find some great deals while traveling. For example, I recently traveled to San Francisco to look into purchasing a restaurant franchise. When I searched for “restaurant franchises” online, I came across several different restaurant chains that sold franchises throughout the United States. Some of these businesses even had locations in my hometown.

Another way to expand your search beyond your local area is to ask friends, family members, and colleagues about small businesses that they think might interest you. Business owners often don’t mind giving advice about their industry because they’re passionate about helping others succeed. And since many small businesses are privately owned, asking someone else for help can give you insight into whether the owner wants to sell his/her business.

Finally, talk to your accountant about the tax implications of buying a small business. He or she can tell you if owning a small business makes sense financially. In addition, he or she can advise you about state laws regarding taxes, licensing requirements, and other issues that come with operating a small business.

4. How to evaluate a company

Business brokers and corporate financiers are experts at valuing businesses. They understand the market and know what buyers want. If you don’t know where to start, talk to one.

Intangible assets

are often overlooked in valuing companies

The intangible assets of a company include things like customer relationships, brand recognition, patents, trade secrets, and licenses. These items are often considered less tangible than physical assets such as land, buildings, and equipment. However, they are just as important to the success of a business. They help determine how much money a company makes and what it costs to operate.

Valuation is complicated and depends upon many factors. In addition, there are different ways to value a company based on its financial performance. For example, you could use a discounted cash flow model or a market approach. You might also look at the balance sheet and income statement to see if the company is profitable.

A good valuation should take into account all aspects of the business, including intangibles. This includes analyzing the competitive landscape, industry trends, and economic conditions.

5. Due diligence

Due diligence is usually done after the sales process is completed. This is because there are many things that could go wrong during the transaction. For example, a buyer may discover that the seller isn’t telling the truth about something. Or, the seller may decide to walk away from the deal. In either case, it makes sense to do some additional investigation into the seller’s background.

There are three major types of due diligence. They include legal, financial and commercial. Each type requires different amounts of work and costs money. You’ll want to make sure you’re getting the best price possible and that the seller is being honest with you.

The seller may ask for extra time to perform due diligence. If he does, don’t rush him. Instead, wait until the end of the exclusivity period. During this time, you can negotiate a lower purchase price.

If the seller asks for more time, tell him that you’d like to continue working together. Then, give him a deadline for completing his due diligence. After that date passes without anything happening, you can start negotiating again.

Where to get help

Due Diligence is an essential step when purchasing real estate. This includes researching the area, looking at the local market, and doing research on the seller. There are several methods to do due diligence, depending on the amount of money you want to invest. If you don’t know where to start, here are some tips to get you started.

1. Research the Area

The best way to find great deals is to look around. Find out about the neighborhood, schools, crime rates, and anything else you might be concerned about.

2. Look at Local Market Prices

You’ll want to compare prices across multiple areas within the city. Do this by searching online or calling local agents. Make sure you’re comparing apples to apples though – make sure you’re checking comparable properties in similar neighborhoods.

3. Get Help From Real Estate Agents

If you plan on working with a real estate agent, it’s always good to ask them questions. They’ve likely been dealing with sellers for months, and they can give you insight into what things are worth.

6. Buying a business

Buying a business is a huge decision. Make sure that you are ready to make the commitment. You must consider all aspects of the business. If you buy a business without knowing what you are getting into, there could be problems down the road.

Consider all aspects of the business you are looking at before purchasing it. Do you like the location? Does the owner seem trustworthy? Are employees willing to work hard for low pay? Is the business profitable? Will you be able to grow with the business? Can you afford the payments? These questions are just some examples. There are many others.

A successful business will provide you opportunities for growth. This is something you won’t find in most businesses. So don’t overlook the opportunity to grow.

Get professional advice

The online valuation tool is free and quick to use. Simply enter some information about your business and it will provide you with a rough idea of what it might be worth. You can either pay £9.99 per month to receive a full valuation report including a valuation based on a sale price or simply pay £49.95 for a one-off valuation. There are no contracts and there is no obligation to renew.

Research

Market research can help you to understand what people think about your business before making any decisions, whether it’s choosing a location, hiring employees, launching a product or deciding how much to spend on advertising. If you want to learn more about what people think about your brand, you can talk to current customers and ask them questions. You could even go online and read customer reviews, or check out social media sites like Facebook or Twitter.

Ask your friends and family members for advice too. They might be willing to let you know if there are any problems with the business or if they notice anything unusual. And don’t forget to look around your neighborhood. Businesses near yours might offer insights into what people think about your competitors.

Initial viewing and valuation

The initial viewing and valuation of a business is one of the most important steps in determining whether it is worth buying or selling. This video provides a detailed explanation of the three methods used to determine the value of a business: market based, income based and asset based.

Market Based Method – In this approach, we look at what similar companies are doing and try to project our future performance into the present. We take into account industry trends, economic conditions, competition and other factors and come up with a fair price estimate.

Income Based Method – In this method, we start with the net profit generated over a period of time. We use this number to discount it back to today’s dollars. We multiply that figure by a factor called “discount rate.” Discounting reduces the amount of profit earned now by considering the fact that some of it will inevitably be lost due to inflation.

Asset Based Method – In this case, we identify the total assets owned by the company. We add up all of the tangible and intangible assets such as real estate, equipment, inventory, etc. Then we divide those numbers by the book value per share of common stock to arrive at the intrinsic value.

Businesses are always looking to grow, and there are many ways to do it. One way to increase revenue is to sell products or services to others. Another way is to expand the customer base. And another way is to buy out a competitor. But, how do you decide which strategy is best? How do you calculate the value of your business?

Arrange finance

Buying a business is a good way to expand your network, gain experience and build your brand. But it can take some time. In fact, buying a business takes about six months on average. And while you might think that banks don’t want to lend money to small businesses because they’re too risky, there are ways around that.

One option is to buy a business outright. This requires no collateral, but it does mean that you’ll need to put up part of the purchase price upfront – typically 20%-30%. You could also look into a secured loan, where you borrow against the value of the assets in the business. If you use those assets as security, you won’t need to pay anything upfront. However, you’ll still need to show that you’ve got enough cash flow to repay the loan.

Another option is to arrange financing through a bank or another financial institution. These loans are called “acquisition loans,” and they allow you to borrow money to buy a business. They’re generally smaller than traditional loans, and they require less documentation. Some lenders even offer loans without requiring personal guarantees.

The downside is that most banks aren’t interested in lending money to small businesses. So, it’s important to find one that will work with you. Start by looking online for companies that specialize in acquiring businesses. Then, talk to friends and family members who have bought businesses recently. Ask them what they liked best about working with the lender. Also, check out local chambers of commerce and trade associations. Many of them run referral programs, and they may know of lenders willing to help.

Make a formal offer

When it comes to selling your business, there are three things you must do well: make a good impression, negotiate effectively, and close the deal. In today’s competitive environment, buyers are looking for businesses that are financially healthy and stable, and sellers want to maximize the value of their companies.

The best way to sell a business is to find a buyer who wants to buy your business. Once you identify potential buyers, you must develop a strategy to attract them. You should start by making a formal written offer. This document outlines what you are offering and includes important information about the price, financing options, and closing conditions.

Once you have identified a potential buyer, you should begin negotiating the terms of the sale and developing a contract. Negotiation is the art of striking a balance between both parties. You don’t want to give too much away, while you also don’t want to lose out on the opportunity. Your goal is to strike a fair compromise that benefits both sides.

Finally, once you’ve negotiated the final terms of the sale, you’ll need to prepare yourself mentally for the process of closing the transaction. Closing requires a lot of work, including signing contracts, getting legal advice, preparing financial statements, completing due diligence, and arranging for financing.

Negotiation

A common problem faced by businesses is negotiating the best price for their products or services. Many companies are willing to negotiate, but don’t know how to do it properly. This article provides some tips on how you can negotiate effectively.

1. Be prepared

Before you start negotiations, make sure you understand the product/service you want to buy, and the terms of the contract. You must also be aware of the value of the item(s), and the costs involved. If you aren’t familiar with the industry, research it thoroughly.

2. Know your goals

What do you want to achieve by agreeing a deal? Do you just want to save money? Or do you want to secure a better deal? Whatever your goal is, think about it carefully before starting negotiations.

3. Start low

If you want to save money, start with a lower initial offer. If you want to secure a good deal, start high. Remember, both parties will benefit from a win-win situation.

Completion

A transaction takes place when both parties agree on the price and terms. Once you’ve agreed on everything, it’s called completion. But what happens after you’ve completed the transaction? In some cases, there are follow up steps that must take place to make sure that things go smoothly. These include verifying financial statements, transferring leases, transferring contracts/licenses, and transferring finances. This process is known as closing.

7. Looking after existing employees

Employees who work for a company, whether it’s a start up or large corporation, must continue to receive wages even during periods where no one is working. This includes employees who are on maternity leave or sick leave. In addition, when a business changes hands there is a set of obligations that the new owners have to fulfil. They include paying wages owed to existing staff, providing them with proper notice of termination, and ensuring that they do not take any confidential information with themselves.

Employment tribunal awards

A man who worked for a car dealership was awarded £2,500 compensation after being sacked because his boss didn’t want him to wear a kilt.

The Employment Appeal Tribunal ruled that the dismissal was unfair because it had been based on the fact that the worker wore a kilt.

In the case of Roddy v Ford Scotland Ltd, the claimant, Mr Roddy, worked for the firm for seven months during 2011 and 2012. He was employed initially as a body shop technician and later became a sales manager.

He was asked to attend a meeting where he was told that he would no longer be allowed to wear kilts while working.

Mr Roddy claimed that he felt humiliated and upset about having to stop wearing kilts. He argued that the reason given for his sacking – that customers might find it offensive – did not justify his dismissal.

His employers argued that the decision was fair because the customer base included members of the public who could be offended by seeing men dressed up in kilts.

However, the employment judge agreed with Mr Roddy and found that the reasons given for his dismissal were not sufficient.

Inform and consult employees

The acquisition of Uber Technologies Inc. by Alphabet Inc., the parent company of Google, is still in progress. But it seems like everything is already set up for the integration. For example, the executive team at Uber is now working under the umbrella of Alphabet. And according to sources familiar with the matter, Alphabet CEO Larry Page had been talking to Uber executives for months before the deal was announced.

Before taking over the company, one must complete the due diligence procedure. This includes reviewing financial statements, meeting with board members, and conducting interviews with potential candidates. Employees will expect to know in advance what is happening in the organization. They want to know why things are changing, how decisions are being made, and whether there is a chance they could lose their jobs.

Make sure you inform them about the changes you plan to make. If you don’t do that, they might feel blindsided. You’ll find yourself having to explain why you’re making some of those changes.

Pensions

If you buy a company, it’s likely that it will come with some sort of pension scheme. This could be a defined benefit plan, where the employer pays into a fund that provides a fixed amount of money each month, or a defined contribution plan, where the employee makes contributions to a personal account. Either way, there is usually a set retirement age, and employees receive payments based on how long they worked for the company.

However, buying a company does not necessarily mean that you automatically become responsible for the pensions of the previous owners. In fact, many companies will have separate pension arrangements for existing and potential buyers. For example, a company may have a defined benefit arrangement for existing employees, while offering a defined contribution one for prospective buyers.

The rules regarding what happens to a company’s pension scheme depend on whether the company is listed on a stock exchange, and whether it is subject to regulation under the Financial Services Authority (FSA). Companies that are listed on a stock market must comply with FSA regulations, which include having a pension scheme that complies with the Pensions Act 2004. However, companies that aren’t regulated by the FSA don’t have to follow the same requirements. They can still provide a pension scheme, although it won’t be legally binding, and it might not even exist.

In addition, if a company isn’t regulated by either the FSA or the stock market, it doesn’t have to inform anyone of its pension arrangements. This means that employees and shareholders may not know anything about the existence of the scheme, let alone how much money is being paid out.

If you buy a privately owned company, it’ll be up to you to decide whether to take over the pension scheme. You might want to do this because you think that the scheme is too expensive, or you just prefer to manage your own investments. Alternatively, you might choose not to take responsibility for the scheme, and simply pay off the debt associated with it.

Finally, if you buy a company that already has a pension scheme, you will inherit it. But you will probably have to make changes to the scheme, such as increasing the number of people covered by it, or changing the way that it works.

Frequently Asked Questions

How to acquire a company name

When you are considering purchasing a business, you’ll often hear people say that you need to “buy” a business name. But what does that really mean? If you’ve been researching how to buy a business name, you might think that you need to pay someone money to use a particular name. In reality, there’s nothing like that involved. A business name is just a piece of intellectual property owned by a company called XYZ Limited.

You don’t need to purchase that name in order to take advantage of it later. Instead, you can simply register it with Companies House using that name. Then, if you decide to trade under that name yourself, you can do so without having to worry about somebody else taking it away from you.

Companies House can help you find out whether a particular name is registered. They provide information about companies that have been formed in the UK since 1855.

How to acquire a business from a relative

Family succession is common in business. But there are some important things to consider before you do anything.

You can buy a business from someone close to you – like a parent, child, sibling or grandparent – just as you’d buy one from anyone else. However, it’s worth thinking about what happens to the business if the person who owns it dies unexpectedly, or becomes incapacitated. If you inherit a business from a family friend, you might be able to use Entrepreneur’s Relief to reduce the amount of capital gains tax paid on the sale.

But remember that the seller may be eligible for this relief, too. So don’t assume that they won’t receive any tax breaks because they’re related to you. Make sure you ask the seller how much tax relief they’ll be entitled to.

If you’re buying a business owned by a partner or shareholder, you’ll need to decide whether you want to keep the same structure as the original owner. This could mean keeping the existing management team in place, or replacing them with people who fit better with your plans. And you’ll need to talk to those managers about their future roles.

Close and open communication with everyone involved is crucial if you want the transition to go smoothly.