STARTING vs. BUYING

 

The main reason most buyers buy a business rather than start one from scratch is because of the established infrastructure, revenue stream and already established cash flow it generates. Though there are risks in buying a business, a great many hurdles have already been cleared to get the business to its current level. Because buying an existing business has its own unique challenges a prospective buyer or investor needs to conduct appropriate research and proper due diligence. PRIVEX can assist with this as well.

 

UNDERSTANDING THE BUYING PROCESS

 

Once a suitable target business has been identified a buyer or investor should verify the condition of the business before committing to making an investment. This includes ensuring that sales are as good as indicated by management and the employees will be accepting of new ownership or management. A buyer/investor should also verify that customers will remain loyal once they take over. A buyer/investor should investigate all aspects of the business thoroughly and confirm appropriate operations and systems are in place, that they are sound, procedures are well documented, and whether the cash flow is sustainable.

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Usually a business owner will want to sell their business for as much money as possible and a buyer will want to pay as little as possible. However, a buyer will have to pay up for a good business that can potentially generate a lot of money and/or higher enterprise value going forward. A buyer shouldn't be afraid to pay up for a good business. Part of what a buyer needs to accomplish is simply to make the seller want to sell the business to them...but on terms and a price that makes sense.​

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