How to buy ready-made business and not ruin: how do companies buy

Due to the transfer of the state sector of the economy to the private sector in the countries of the former union, many young people want to become entrepreneurs. According to statistics in Russia 51%, in Ukraine 48% of school graduates want to open their own business. Many of them do not even know what private enterprise is and how to become a businessman. Experts and successful businessmen advise not to start a business from scratch, but to buy an existing one. The workflow has already been established there, there is a material and client base, contracts with suppliers have been drawn up. The new owner only needs to manage and increase volumes.

When you have accumulated capital, you can buy a ready-made business. So you will start earning income immediately, saving time and nerves on starting a business.

It doesn’t have to be a high-tech project developing artificial intelligence to colonize Mars. A car service, a beauty salon or a restaurant may well suit you.

However, buying a business must be taken seriously, weighing all the pros and cons. Below are the steps that it is desirable to go through in order for your venture to succeed and the money to be invested profitably. Read more in the article.

Ready made business: what it is and how to buy it

Ready made business is, first of all, a process. The process involved, assets, people and other factors. This process has passed the stage of birth, development and has financial indicators that can be measured and evaluated. A business is a developed and launched project for the production, sale or provision of services.

A young man who has an idea for his own business is confused and does not know where to start. He looks closely at an already operating business, and it seems to him that everything is very simple and easy. He begins to compare how much money is needed to create his enterprise from scratch or it will be cheaper if he buys an already operating company. Many individual entrepreneurs have gone this way, but when they created their own business, there was no ready-made business for sale yet. Today, many small firms and enterprises are being sold, so any future businessman who decides to start a business has a question whether to buy an already existing company or create a new company. In both cases, there are a number of advantages and a number of disadvantages that should be paid attention to. Let’s take a step-by-step look at all of them.

For the market of purchase, sale or lease, the ready made business must have the following characteristics:
a) be active;
b) be prepared for sale and transfer to another owner (be “packaged”).

Buying a company: where to start for a newbie, so as not to be deceived

1). The first case, when a person is limited in time, he needs to conclude a deal, for this you need an already opened current account. In this situation, it is best to contact a law firm, for example, the Business Support Center and buy a working business.

2). Or another option is possible. If you do not have a time limit, and you can independently register the law firm you need, from scratch, individualizing some features. For example, you want a specific name for your organization, or one or another legal address is important to you. Perhaps you want to write down what kind of economic activity you want to be engaged in, taking into account your education and qualifications. Specify what you are going to do: produce products or provide services. If you indicate the activity that interests you and is necessary for you, then you will have an advantage. If you decide to buy a ready-made company, then you will no longer have these options.

Algorithm of actions when buying a ready-made company

1). For example, you still decide that you need a ready-made registered law firm. To do this, you can also contact the Business Support Center with all your conditions. You indicate what kind of company it should be, its type of activity, what volume of trade, what material base, what licenses and permits should be for the successful functioning of your law firm. All these requirements are transferred to the employee of the Center. Then the employees of the Center will select, in their opinion, the most comfortable law firm for you, which already has a bank account. At your request and request, they can offer a company that does not yet have a current account, and you can open it in your name.

2). If you decide to purchase a company on your own, then first of all you need to check its constituent documents, as well as pay attention to the legal address, check whether the legal address of the company you are buying is a mass registration address. That is, one legal entity is registered at this address. With mass registration, several enterprises can be registered at one address. It is very important. Next, you need to familiarize yourself with the list of founders of the company you are acquiring. The founder can be both an individual and a legal entity. If this is a legal entity, it would be good to familiarize yourself with the entire package of documents. If an individual, you need to contact him personally and ask if he created the organization put up for sale, for what purposes and why he does not want to continue his activities.

3). The next point, which also needs to be paid attention to, is economic activity. Here you need to find out what activities were carried out in this organization from the moment of registration to the expected date of purchase. If the company has been actively working, then it is necessary to familiarize yourself with the financial statements. If the enterprise is mothballed and does not engage in any activity, then check whether there are zero reports to the tax authorities, and whether there are approved acts of the tax inspection about the absence of unpaid fines.

4). The next significant point is how the authorized capital was contributed, and its condition on the day the enterprise was sold. Entrepreneurs can pay for it in two ways: cash or property. If it was paid in cash, then you need to ask if this amount is on the company’s account. In this case, most often, this amount is added to the value of the company. It must be remembered that today the authorized capital is paid when registering a business only in Russia, its minimum amount is ten thousand rubles. In Ukraine, the authorized capital for private entrepreneurs is not established. It is set only for joint-stock organizations.

If, when registering an enterprise, a businessman contributed the value of property at the expense of the authorized capital, as a rule, this is some kind of office equipment or office furniture, you need to ask what kind of property it is. If this is furniture and it is listed on the balance sheet of the company, then these are low-value funds and are not taxed. But, if this property is displayed as fixed assets and is listed on the balance sheet of the enterprise, then the individual entrepreneur, that is, the person who acquires the company, will need to bear tax costs in the future. If this property is described as low-value or depreciating quickly, then depreciation can be carried out, that is, its cost can be included in the cost of production and written off from the company’s balance sheet.

Subtleties of the transaction

Now let’s go directly to the acquisition of a ready-made law firm. Two options are possible here: the first is the change of the founder, director of the company. Then it will be necessary to conclude a contract of sale. The second option is to simply change the director of an already existing company. But again, there is a pitfall here. If only the director changes, and the founders remain the same, they can decide to change the director at any time. Be careful, and also remember that these processes will take some time to complete the paperwork and, perhaps, sometimes it is more profitable for you to start the registration of a company from scratch.

Is it worth buying a ready-made business

Due to the fact that in recent years the number of cases when businessmen sell their business has increased, very often young people are tempted to buy an inexpensive ready-made business. After reading the advertisement, a future entrepreneur may have an idea to buy it in order to get rid of the routine registration of a new business.

So, lawyers and support center experts businesses advise such people to carefully study this idea. Because buying a ready-made business is 95 percent an attempt by the seller to close his business and blame the buyer for the problems that have arisen.

Here you need to understand the logic. If the business works normally, the process is optimized, everything is built and functions well, the enterprise has income and makes a profit, and suddenly it is sold. The question arises why? Why sell a business that gives a stable income.

To avoid fraud when buying a ready-made business, you need to do the following. Hire a qualified, experienced auditor who will do a full analysis of the business. And, in nine cases out of ten, he will tell you exactly where, and how exactly, and how much they are trying to throw you. There is another option, you just have to understand that a well-functioning business is not for sale. If you believe this, then protect yourself from fraud. If you are still looking for a ready-made business, be sure to take a specialist with you who will see a weak point in the work of an enterprise or company.

The thing is that when an inexperienced person buys a business, then he is on an emotional upsurge , he is already making plans to get promoted and get rich. And when a specialist looks at this situation, he evaluates it from the position of risks in the functioning of the enterprise. He will evaluate what turnovers, what expenses and what real incomes. It will tell you what are the risks and what are the opportunities. Of course, you will have to pay for such a report, but trust me, it will be much cheaper than buying a dead business.

Summary

Buying a business is potentially the largest investment you will make . Whether you’re buying a franchise from an existing brand or an independent company with the intention of building a reputation, be sure to do your due diligence.

Hurrying and failing to analyze the business you are buying is one of the main reasons for the loss of investment, so make sure you do everything possible to make sure that the purchase is reliable.

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