Considerations when looking to buy an existing business
This article discusses some of the biggest factors involved with purchasing an existing business.
Anyone looking to own a business here in Toronto, or elsewhere in Ontario, might believe that purchasing an existing business would save a significant amount of time and effort in getting such a venture off the ground. While this serves as an attractive reason to go this route, it is not without its risks and limitations.
Before taking this step, an interested party may want to ask several questions and consider numerous factors. Just because a business exists does not mean that it can’t fail or will provide an easy avenue for success. This does not mean it isn’t a good choice; it simply requires thorough review before moving forward.
Should it be an independent business or a franchise?
One of the first considerations an entrepreneur should address is whether to purchase a privately owned business or a franchise. In order to make that determination, it may help to know the primary differences between the two, which include the following:
· An independent business may provide more control to its owner, but it also comes with all of the responsibility for making it a success.
· A franchise comes with a proven record of accomplishment, but it also comes with rules and regulations that the franchise owner must follow.
· An independent business provides more opportunities, but it also provides more risks.
· A franchise provides the training, support and setup of the business, but again, it does not allow for much individuality, if any.
· An independent business allows its owner to keep all of the profits, but also all of its losses.
· A franchise comes with a ready-made customer base, but this also means customers have immediate expectations.
These represent only some of the pros and cons associated with an independent business and a franchise. Each one requires evaluation in order to determine which avenue would provide the best opportunity.
The type of business is only the tip of the iceberg
Moving beyond the aforementioned choice, numerous other issues require consideration. For instance, location still plays an important role. Even a franchise may not see the appropriate measure of success if it ends up in the wrong place. Is the business worth the price the current owner is asking for it? If the company is not doing well, you need to consider whether it stems from the way the current owner runs it at present or whether other factors contribute to it.
It may be possible to overcome bad management, but a bad location, products or services provide more of a challenge. Does the interested party understand the industry well enough to know the difference? All of these questions and more need answering before agreeing to purchase an existing business.
Finding the right answers often requires support
A Toronto entrepreneur doesn’t have to find the answers to these and other questions alone. When it comes to investigating the business and legal aspects involved in researching and buying an established independent company or franchise, involving a lawyer with experience in these matters often proves invaluable. Any tools available to an entrepreneur help increase the chances of a smooth purchase process and a successful future.