Factors to consider before buying a business in Nigeria
Factors to consider before buying a business in Nigeria
It is no hidden fact that a lot of financially capable investors are willing to buy over businesses to make more money. Some investors buy existing businesses because of expansion, some because of the need to reduce competition, and others as a result of willingness to invest in another industry or sector. However, it is important to stress the fact that no business man/woman wants to buy a company and incur losses, the major aim of buying a new business on the part of most entrepreneurs is to make additional profit. For you to buy a new business either as an already existing entrepreneur or starter there are things you should consider before becoming the owner of a new business.
Knowing the seller’s motive
Someone that wants to buy a business should be certain about why the owner wants to sell his/her firm. You should be sure that the reason for selling the business is genuine not because the enterprise is no longer productive. Reasons such as bankruptcy is not bad, you can buy the firm and change its financial status. Factors such as low or poor sales on the part of the owner, maybe the business is no longer profitable to the populace, are disturbing, do not make the mistake of taking over ownership.
Buying the right business
A lot of business men/women make the mistake of buying the wrong business. You should buy a business that is right for your skill set, experience or one that fits with your existing business. There is this wrong perception most times an owner wants to sell his/her establishment, people easily think they have gone bankrupt or no longer capable enough to run the business. However, there are numerous reasons a business owner might decide to sell his business for, they include, health issues, inability to meet up requirement for increased investment in the business, and owner’s age profile amongst other reasons.
A buyer should do a thorough personal research and when it fails to yield result, advisors are the best option left, they could connect you to suitable targets for the kind of business you want to buy over. When you buy a business that is not suitable for you, it is very difficult to stabilize especially when you lack a team of staff willing to help you run the business. One might say ‘’I know nothing about this business, but I can buy it and employ experts to do the job for me,’’ this is very wrong because you could be cheated and once people that work for you perceives your lack of technical know-how for the business you ventured in, it could ruin everything.
Nobody wants to venture into a trade that is not productive; you should know the market value of the business you want to acquire. The best thing to do is ensure you have great knowledge of the company’s history. Entrepreneurs have to be certain and have perfect understanding of the venture’s history. Know the longevity of the business and if it has been in any other locations. The models used for operating the business previously, why the model was changed, effective and ineffective factors that work for the business, and the staff history are crucial questions a buyer must be able to answer before taking ownership of a new firm.
Financial history of the business
Having perfect understanding of the financial history of the business you want to purchase is great advantage. Deep knowledge and understanding of all certified financial records is great step towards acquiring a new firm. Cash flow statements, receivable and payable account, tax returns, and balance sheets are some of the financial history an entrepreneur should have great knowledge about before buying a business. Also, having a look at the employee personal files and payroll records is a great idea. Thorough review of major contracts, inclusive of dealings with suppliers and customers for property and equipment lease.
Legal history of the business
Legal history of the business you want to buy is also very crucial in determining whether you want to buy an establishment. You should know if the company faced lawsuits in the past, whether as plaintiff or defendant, and the outcome of those cases. This is critically important and could require a review by certified public accountant and an attorney to ensure your take on the finances are impartial.
A buyer should discuss the business’s inventory and related details with the seller. Clarity on who will be keeping the inventory is necessary to avoid conflict of ownership. Knowledge of the practice, system or style used by the company to manage and organised inventory is equally important. You should be able to properly negotiate terms and conditions of ownership with the seller, this is probably the major reason why gaining ownership of an enterprise take long period of negotiation.
Ownership of assets
Whether the seller of the business you want to acquire is a corporation or limited liability company, ensure you do not buy stock in the business; present an offer to buy the assets of the business. The benefits attached with gaining ownership of assets include, better tax treatment and you do not get to assume responsibility for liabilities such as debts or law suits. Some buyers make the mistake of not properly stating ownership of assets during negotiations and in documents signed to formally acquire ownership of a new venture.
Knowing and maintaining employees
Make sure the key employees of the firm you want to buy are willing to stick around once you buy the business before you gain ownership. This is to ensure consistency because they are the familiar with customers that patronize products of the business and are very vital to not loosing customers. The employees know all the tricks associated with making progress in the business, do not underestimate their capability. Staff retrenchment due to new ownership is not the best ideal to succeed when you buy a business, you might loose a lot of customers due to this.
The feedback from customers after consuming products of a company or after services rendered is crucial to ascertain the profitability of the business. As a buyer, you should make sure you know this because it will help you in making projections when you take ownership. Also, it could serve as factor for or against buying the business.
- Guaranteed: Process Your BOI Loan with Accredited Consultants - August 12, 2020
- N1.5 Million Grant for Female Entrepreneurs. 5 minutes Application - August 7, 2020