Buying an existing business is more attractive as it has less of a risk then starting a business from scratch. For people who want to purchase a business in Grapevine, there a few aspects that they have to take into consideration before reaching a decision. Buying even an existing business can be fatal without taking the appropriate steps.
Four steps to consider before you purchase a business in Grapevine
The most important steps include:
- Find out about your interest: Sit and think about what interests you? This will help you eliminate businesses that are of no interest to you.
- Value your talents: Be honest to yourself. What are your talents? What can you specialize in? This will help you get rid of unrealistic business ventures to invest in.
- Conditions for your business: Consider if a business has any conditions that do not suit you, for example the location. Do you want to purchase a business in Grapevine? Or would you prefer Dallas or the Fort Worth area?
- Quantify your investment: Before making a decision, question yourself about why this business is up for sale in the first place? Why would someone sell a profitable business?
These are the four steps you should consider before deciding if you want to purchase a business in Grapevine or not. Studies have shown that there is a steady growth in business sales in Dallas as well.
Advantages of buying a business
Purchasing an established business has its benefits. Here are the most prominent advantages:
- An existing customer base and contracts.
- The difficult start up work has already been done with the businesses plans and procedures in place.
- No need to do extensive research on finding vendors as they already exist.
- Staff and management are already present so there is no need to hire and train new people.
- You can learn all about the business through the previous owner. This will help you avoid any mistakes and will lead to financial stability.
- Since the property will be included in the deal, it helps you avoid searching for premises and other leasing tensions.
- By buying the business, you will be purchasing the business’s good will as well, which is associated with the name and location.
- It is easier to get loans from banks for existing businesses that have a previous trading record.
- Drastic reduction in startup costs.
- Existing inventory can help you jump start your cash inflow.
Disadvantages of buying a business
The above clearly shows that purchasing a business has a lot of advantages but like everything else in this world, there are disadvantages of such a venture. It is crucial that these disadvantages are considered by the potential buyer. Given below are the disadvantages which you might have to face:
- Staff members might leave their jobs as they don’t approve of the changes in the business. Besides this, other staff cost such as severance pay is transferred to the new owner so such staff entitlements have to be taken care of.
- As mentioned before, by buying a business, the new owner inherits the goodwill. This could be a disadvantage if the company previously had a bad image as it will be very difficult to change.
- In some cases, you might have to honor a contract that was signed by the previous owner.
- Premises issues as the previous owner might have had problems with the landlord.
- The premises may be really small and hamper any future growth options.
- Purchasing costs are sometimes higher than the cost of starting a new business due to the initial business concept and other fundamental work that has already been done.
- There can also be hidden problems associated to the business that the previous owner will not declare when selling the business.
- You might also have to honor the previous owner’s debts and might not be entitled to any debts owed to the business.
- The equipment provided may be old or outdated.
- The owner might be dishonest with you and the business could be in a bad position with no prospects of getting better in the future.
Research for purchasing a business
The only way to make sure that you don’t face any of these drawbacks once you buy a business in Dallas is through extensive research. It cannot be stressed how important this is and how it can affect the outcome of your decision.
When deciding what business you want to buy, which could be a neighborhood sports bar or a franchise; it is important you conduct a thorough objective investigation. Here are a few things you should include:
Letter of intent
This should spell out the price of the business and the terms plus conditions.
This indicates that you will not use any of the business owner’s information for any reason besides inquiring about a purchase.
Make sure all of the business tax returns are in order and that there is no discrepancy in the company’s accounts and all the information that they declare.
Other important documents
There are a few other documents that should be checked while you conduct your research. Examples include property documents and sales records.
Seek professional help before you make your decision. Hire an attorney to make sure all the legal proceedings are in order. Hiring an accountant can help you get a better idea about the business’s profitability and sales records.
There are companies out there that specialize in helping set up a business plan to purchase a business in Grapevine and other areas. You can hire one of them to help you choose the best business that will take into account all the factors that come into play. Not only this, they can handle all the paperwork and can provide you with a statistical analysis on the business’s profitability.
Although hiring a third party to help you with this decision will increase costs, it will reduce the risk margin.
So before you decide on which business you would like to purchase, consider all of the above and surely you can then find an existing business in Grapevine that best suits your situation.