Business Plan For Buying An Existing Business

He or she faces the same decision manufacturers call the "make or buy" decision: Should we tool up to make this product or buy it from someone else?To make some-thing from scratch usually takes longer but offers opportunities to shape the product exactly as the builder intends it to function.The motivations of buyers and sellers are essentially the same.

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Such an individual is functionally equivalent to a company in means and in experience.

Buying an existing business is also, finally, one of the alternatives available to the would-be entrepreneur.

Most businesses are purchased by companies as a means of diversification or expansion.

In these situations several of the ingredients of success are usually present: the business has good reasons for the acquisition, it has experience in the industry to be entered through long contact, it has skilled people to evaluate acquisition candidates, it has the means to make the purchase in cash or through contact with funding sources, and it has the ability to run the purchased business. Similarly, the prospective buyer may be a wealthy individual with many years of business experience but presently no corporate base.

Initial homework consists of exploring the industry or specialty that looks most suitable to the talents and experience of the buyer.

A part of that homework is to learn the going price for different types of enterprises.That process is described further later in this entry.Evaluation of a business is central to price negotiations later and must be carried out with care and diligence in order to avoid legal and financial problems later.If the buyer has no business identity, the seller will usually ask for references and not make financial disclosures beyond those advertised until the buyer's status and net worth have been carefully checked.In the normal course of events several contacts will take place before the buyer can obtain information sufficient to study the targeted business closely.Buying rather than building a business is a decision to be reached Once the funding issues are resolved sufficiently to turn the entrepreneur into an actual buyer, meaning that at least a portion of the down payment is in hand, the key elements of buying a business are 1) formulation of clear objectives (homework), 2) search and contact, 3) evaluation of the target (sometimes called due-diligence), and 4) negotiation and purchase.These elements are very frequently iterated in an actual acquisition program, meaning that failure to close deals and the learning that has taken place while getting to an unsatisfactory result will cause the entrepreneur to rethink the process, sometimes from the beginning.Examples of sites, including one that advertises businesses for sale directly (cityfeet Biz) and of brokers (United Business Brokers, serving cities in Utah, Nevada, California, and Idaho), are provided in the references; there are many more.Once contact has been established with a candidate, a process of mutual exploration begins, usually with a visit to the candidate's place of business where, following a tour of the place, preliminary discussions begin.Substantial searching around is, of course, implied—but provides a great deal of information on what is available, what asking prices are, and where the nearest targets are located.Searching can be handed to a broker who will then call or e-mail the buyer with suggestions.


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