Quite often the task of buying an established business is both arduous and complicated; luckily however there are business consultants such as Phoenix BSC [1] who can advise and evaluate prospective business owners interested in taking over a business.
The truth is that there are many options available to someone wanting to advance in the business world, whether you are interested in a franchise, start-up or home based business.
There are certain advantages to buying into a business that is already running:
- You will be able to gauge its history, utilise your personal strengths and create a plan to discover just what will make the company profitable in the future.
- It is highly likely that the business will already have an existing client base or following. From this you will be able to work out areas for improvement and who exactly you want to attract to your business.
- From the decisions that have been positive in the past, you will be able to work on these and make processes even better than before. More to the point however, a business that is already running has a far greater chance of success than one that has just begun
After you have decided that you are certainly interested in a particular business or field, it is therefore possible to investigate as to whether you should need a business broker.
A business broker is similar to a real estate broker in that they will try and bring the seller and buyer to a form of mutual agreement.
These are people who quite often work on commission so if you do not end up buying, the likelihood is that they will not need compensating. Many people will advise you to hire the services of a business broker as they will make your job far easier.
If you do not decide to hire a business broker it is therefore important that you get the right price for the business that you are buying.
This is probably by far the trickiest part to buying as no one in the business or everyday world will want to buy something for a greater price than it is worth.
There are very many ways of evaluating and negotiating the price of a business but in time, a good deal will justify the finance price with profitable rewards.
The two main tradition methods for valuing a business are Asset Based Valuations and Cash Flow Multiples.
- Asset Based Valuations take into account things such as the company building and machinery; the prospective owner therefore buys these according to the valued price.
- The Cash Flow Multiples valuation works out a formula based on profit, benefits, expenses and works out multiplying factors to establish a price.
Both of these techniques are extremely complicated and the above descriptions are a very basic explanation of the two methods.
Remember however, that your own personal age will have an effect on as to whether a business deal is viable for you. If you are only planning to work for another ten to fifteen years then you may want to consider an alternative plan.