|
A
Little Literature on Buying and Selling Going Concerns
by
Mike Hindle of Aldes Business Brokers
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The buyer
You
may want:
| * | A job; need income, can't find employment |
| * | Independence and security; |
| * | An investment; |
| * | To satisfy a dream or ego trip; |
| * | To relieve boredom; |
| * | To climb of the corporate ladder and go it alone; |
| * | To give up being a housewife; |
| * | To buy companies, build them up and sell them; |
Most
people want a sound business with a track record and provable figures. Not everyone
meets, success and failures occur mainly because buyers were unprepared for
the minefields that lay ahead. US surveys tell us that of the 500 000 Americans
buying or starting businesses each year, 60-70% select the wrong type. Most
have not asked the crucial question: What business am I best suited for? Instead
they chose a business easy to get into or which looks highly profitable. Choice
is critical. It should be in a field about which you know something. Don't buy
if you have to rely completely on staff expertise. Don't go for hairdressing
if you are not a hairdresser, owning a restaurant if you can't cook or running
a workshop if you have no mechanical back ground. No matter how good the profits
are, you are completely in the hands of the staff and nine times out of ten,
you will find the seller has the expertise.
Advantages to buying an existing business?
You don't have to wait to establish profits, you have and income from day one.
The average time to establish a new business and get it to profit is approximately
18 months; the success of the business is proven; your drive and enthusiasm
can go to raising profits as opposed to trying to get them started; there are
no start-up problems - you have customers, employees, suppliers and physical
plant and premises. Often the seller is prepared to provide financing at a lower
cost and with less security than would be required by a financial institution.
Sellers sometimes allow purchasers in to verify certain aspects of the business;
this gives an opportunity to see if the business suits you. You may be able
to buy a profitable business for less than it would cost to set up a similar
concern. Internationally, 9 out of 10 new businesses fail in the first 2 years.
Why not buy an existing business?
The business may not be exactly as you would like it to be; size or location
could be wrong; you may be buying problems of someone else's creation; you may
not agree with the value put on the "goodwill" of the business.
There are really only two cases where it may be better to start your own as
opposed to buying a going concern. They are:
| * | When you have a product so good it must be a winner; and |
| * | When you are able to secure prime premises with enormous passing trade so that virtually any business would be a winner. |
Even so, you would need to tread carefully!
Mike Hindle of Aldes Business Brokers, www.aldes.co.za
Back to www.bizland.co.za
