Making a Success of Your Business
Buying a Business
If you intend buying an established business, you are avoiding a lot of the uncertainty involved in becoming self-employed. However, you could be buying a business that may not have a good history. You will need to carry out research as to its reputation and the likely reaction to a change in ownership.
The advantage of buying a business that makes very little profit, and possibly has a bad reputation, is that the purchase price will be low. The disadvantage may be that the business may never be successful.
The advantage of buying a business that is profitable is that it eliminates a lot of the risk and uncertainty. However, the cost of purchasing the business will be high, and there could be a possible loss of goodwill that the previous owner had generated with a consequent loss of income. In addition, a lot of the satisfaction of creating a successful business will have been removed.
When buying an existing business, you will need to find out the reason for the sale, the reputation of the business, and whether the vendor is going to establish a similar business in the area; then you can consider whether the purchase price is realistic. For this you will require advice from an accountant.
Doing Your Homework
You will also need to ask yourself questions just as if you were starting the business from scratch, such as:
- Is the location correct? This will be vital if it is a shop that is being purchased.
- Is the demand for your service or product seasonal? If so, you will need to time the start or take-over of the business so that you can benefit from the peak period early on in your business year, otherwise additional funds will be required to keep you going.
- What will be the reaction of the competitors?
- Could the action of a competitor destroy your business? Who will be your customers, and will existing customers be retained?
- How will you market your product or service?
- What is unique about the business that will make people buy your product or service?
- Is the business in an expanding area of the economy?
- How much will you charge for your product or service?
- What are the overheads that are likely to be incurred?
Once you have answers to these questions, you will need to consider them carefully. The size of the business that you intend running will affect the levels of skill and experience required. A person providing a service based only on their own skills will not initially have to deal with staff, whereas someone who is involved in manufacturing or retailing will need to employ and deal with staff.
If you consider that you have not been able to answer all the questions positively, you may have to look at involving other people in the business. This may be a partner or outside help as and when required.
If you have answered the questions honestly and positively, you will need to prepare a business plan. However, before that is done you will need to consider the type of business structure under which you intend to trade.