Things to Consider before you buy a business
There are many things which a buyer has to consider before you buy a business. We have compiled a few points which should be checked before you buy any new business. There points need specific attention since many buyers miss out these important points before making the decision.
1. Make a clear distinction when you are considering to buy a business: whether you are acquiring that other entity or you are just acquiring the customers of that particular business i.e., buying the goodwill of other entity. Acquisition of a business happens when you take control of all the assets and liabilities of the entity at the time of sale of business. Employees of the seller of the business will now become employees of your business immediately after the acquisition.
On the other hand when you acquire only goodwill i.e., the customer of the business, you shall not be liable for any liabilities of the seller of the business neither you can take the benefits out of the assets of the business.
2. Customer retention:
Check from where the major revenue of the business is coming from, whether from a loyal customer or whether from new customers most of the time. It is more advisable to buy a business with more loyal customers. However, nature of business should also be given due consideration since it might happen the nature of business
is such that same customers every time may not be possible or it may not be possible to know who the loyal customer is. For example: a repair shop or a salon.
3. Government Regulatory requirements: This becomes very important steps when you are purchasing a new line of business. It is always beneficial to check whether the business is compliant with all regulatory requirements till now and to know all the compliances which you as the future owner of the business will have to comply. Check the feasibility and cost of compliances as many a times you will have to hire a professional to help you with the compliances requirements
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