ACQUIRING AN ESTABLISHED BU

SINESS

Presented by: Team 5

o Growing your business internally can be a sluggish and high-ris
k strategy in a fast-moving business world. That's why many ent
repreneurs choose instead to acquire an existing firm.

o This strategy eliminates many of the headaches involved in ge

tting a start-up off the ground, such as developing products, hiri
ng the right people and building a sound customer base. It also
gives entrepreneurs a jump on the start-up phase - a time whe
n many new businesses fail. Often, it's the only feasible way to
break into a particular field, such as tourism or manufacturing,
since start-up costs in these sectors can be prohibitive.
FIND OUT WHETHER OR NOT YOU ARE TRULY A FULL
Y MOTIVATED BUYER

o Do you know what kind of business you want to buy?

o Are you "technically" qualified and experienced enough to run the business
?
o Do you have the temperament to deal with fickle customers, demanding cr
editors, and difficult employees?
o Do you have the attention to detail that most businesses demand?
o Can you deal with the bookkeeping requirements of the business?
o Are you prepared to "eat, sleep, and drink" the business 24-hours a day, 7
days a week (because that's what it frequently takes)?
o Can you deal with adversity without losing your cool?
o Can you deal with uncertainty without losing sleep?
o Are you a good "people person" who can successfully deal with both custo
mers and employees?
o Can you accept the potential significant financial loss that investing in the b
usiness exposes you to?
KEY REASON IS FOR BUYING AND OPERATING A BU
SINESS (IN ADDITION TO MAKING PROFIT)

o buying a job to earn a living

o acquiring an attractive lease or other real estate
o buying prestige (many business owners are respected com
munity leaders)
o eliminating competition if you already have a business
o buying a hobby or retirement occupation
o seeking self-fulfillment and control of your own destiny
o seeking an opportunity for a child or other family member
 PREPARE TO BUY A SMALL BUSINESS
(THINGS TO BE KEPT IN MIND & TO DO)

1. Know what you want before you start looking. Do research into
the location and the type of business you will feel most comfor
table owning.
2. Create your own business plan even if one is already in place. A
business plan is usually expected when applying to finance a b
usiness
3. Try to obtain funds before you begin looking. Business owners
and brokers will take you more seriously if you are prequalified
for a loan or have commitments from investors.
4. Consider what is necessary to qualify for a business loan. A len
der will want you to have a good credit record, collateral for the
loan and business experience to make sure you won't default on
payments.
 EVALUATE AND BUY A SMALL BU
SINESS
1. Hire a business lawyer and an accountant. These professionals
can help you with the aspects of business purchase and operati
on that may prove time-consuming or difficult.
2. Find out if you can take over the lease or rent of the current bus
iness location before you buy to avoid problems trying to find a
new location. Such a search could affect profits.
3. Make a formal offer in order to review financial records and bu
siness documents.
4. Be sure that the business is current with all of its taxes, includin
g payroll taxes and sales taxes.
5. Research state laws that have to do with the sale and transf
er of businesses. Your business lawyer should help you addr
ess these.
6. Consider how you are going to handle current employees an
d whether you need them to teach you how to run the busin
ess.
7. Remember that there will be closing costs that may include
prorating and reimbursing the seller for any payments that
were made in advance.
8. Choose a long escrow if you need time to see the business op
erate or if the business is seasonal in nature.
 BENEFITS
o Buying an existing business is less risky than starting from scratc
h.
o You have an established customer base, reputation and employe
es who are familiar with all aspects of the business. 
o You don't have to reinvent the wheel - setting up new procedure
s, systems and policies - since a successful formula for running th
e business has already been put in place.
o An established business should be at least close to turning a pro
fit already. It's preferred that there is a good track record of profi
t dating back through several years, but this isn't always so. It's u
p to the buyer to analyze the cost effectiveness of the purchase
versus another business or a newly established business.
o Equipment being in place already is another benefit
o These provide instant equity should it be needed. What this mea
ns is more financial opportunity and flexibility over a business th
at is still trying to get off the ground
o Loans against equipment and property that is already paid for ar
e much easier to come by and require a lot less legwork.
o It's easier to get financing to buy an existing business than to sta
rt a new one.
o Buying a business may give you valuable legal rights, such as pat
ents or copyrights, which can prove very profitable.
 SOME ADDITIONAL TIPS

o Stay in the area you know

o Look for the right fit
o Evaluate the risks
o Look for synergy
o Look at the firm's identity
o Consider the company's culture
o Evaluate the costs
 AN K Y O U
TH