We all want to be entrepreneurs and business owners. The big question though is this — Do you build a business form the ground up or do you buy a business that is already up and running? Which alternative is more attractive? Sometimes, if you have the necessary funds, the latter may be the way to go. However, when buying a business the danger is real. You could fall… badly. Therefore, Bizzvenue is going to share a few tips and rules that will hopefully help you stay out of trouble.

1. How deep are the sellers pockets?

When buying a business, you don’t just come in one morning with a cheque and take over. Transfer of ownership is a lengthy process. During this time, it’s likely the contract requires the seller to make adjustments and changes before handing over the keys to your new business. Depending on the size of the business and the contract you want to sign, the cost of these changes can be enormous. Make sure that the seller is financially capable of fulfilling the said changes. You don’t want to find yourself in court over a breech of contract before you even got going. If in doubt get out.

2. Will you be able to key employees ?

Depending on the nature of the business, sometimes the business orbits around a specific person. This could be said about Apple — Steve Jobs. The same is true and far more common in smaller companies and businesses. If you are looking into getting a business that is built around a key employee, you don’t want to lose the said employee. Make sure the contract has a clause ensuring that you get to keep your key employees.

3. Make sure you’re buying a business and not a sack of debt.

Protect yourself. Unless you are intentionally trying to buy a company that has debt, make sure you are starting off with a clean plate. You don’t want to pay fines, loans and expenses of the previous owners. Of course it’s possible to take these fees on yourself but the price paid for the business needs to be adjusted accordingly.

4. What about non competes?

So you buy the business, but the sellers starts up the exact same business the next day. This isn’t a scenario you want to deal with. Of course non competes depend on the type of business you’re buying. However it would be a good idea to protect yourself and get the seller to sign a non compete with you.

5. What is the current condition of the business and its assets ?

You need to check the physical condition of the companies assets. If you are buying a business with 100 computers, that’s great, but what happens if they are running non-licensed operating systems? What happens if the computers are stone age pentium 3 machines? What happens if the company owns a few buildings but none of them meet fire regulations? Many people don’t give these so called small issues any thought until after the contract has been signed. You then realise you have a bucket load of things that need fixing. Depending on the costs, your deal may no longer be worthwhile.

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