No matter what you do in life, how old you are, or what industry you’re in, the experience of purchasing a business will never be a small feat.
Although such occasions aren’t the newest available opportunities in the market, acquiring an entire company is a capital-intensive process that offers much promise. When done correctly, purchasing a business can easily be one of the best financial decisions you can ever make because of how lucrative the opportunity truly is.
Instead of going through the rough patches of starting a new operation, purchasing a pre-existing company cuts out the need to deal with growing pains. Thanks to Australia’s growing venture capital and start-up industries, opportunity-seeking investors are exposed to a near-endless assortment of businesses that they can acquire and develop accordingly.
With a one-time fee (or any other minor expenses), you get to take control of a location, equipment, trained staff, and an established client base, all of which yield valuable possibilities.
The difficulties of acquisition, and how you can avoid them
While it may be easy to see why buying a business is one of the most profitable and worthwhile decisions you’ll ever make, it’s vital to note that it can prove to be the opposite if you’re not careful.
Many first-time investors have lost thousands to millions over purchasing businesses because they failed to prepare for the unwelcome surprises that were not spotted during the deliberation process. While many acquisition opportunities can yield a lifetime of wealth and profit, there are even more that are duds paradings under the guise of heavily-padded sales talk.
Fortunately, you can save yourself time, money, and stress while avoiding potential money pits during your next investment search by making these three considerations beforehand:
Factor #1: The current licensing agreements with suppliers
Before thinking about creating a ten-year plan on what to do with a potential investment, having a strong understanding of an available business’s licensing agreements with its suppliers is crucial.
Although it may not seem like much now, gaining a greater understanding of a listed firm’s licensing obligations will yield insight into profitability and pre-existing limitations to expansion. With the help of a dependable expert in the contractual obligation’s field—such as GLG Legal—you can inspect the current licensing agreements a business has with its suppliers to grasp the extent of such contracts fully. Once a legal expert goes through the pre-existing agreements, they can explain what these commitments entail, what they mean for your causes, and whether or not they’re worth keeping!
Factor #2: The ownership of the company’s equipment
When first-timers purchase a business built by someone else, they end up rushing into the experience that they overlook crucial details, one of which is the ownership of the company’s equipment.
Apart from the property, licensing, trademarks, and products, the pieces of equipment a company owns all render a heavyweight to the overall valuation of a firm and its investment feasibility. To ensure that your money gets what you’ve paid for, you’ll need to check whether or not you’ll receive the company’s assets free of encumbrances and do the math to see if everything makes financial sense before sending an offer!
Factor #3: The real reason a business is being sold
Typically, there are three common reasons business owners sell their business: 1) they’re looking to source funding for a new opportunity, 2) they feel that their business is better in more capable hands, or 3) it’s a sinking ship. Once you understand why a company is sold, you can save yourself from investing in a potential money pit because it makes it far easier to get an unfiltered grasp of what you’re getting into!
Buying a business that has been created with someone else’s hard work is an understandably exciting experience because of the potential profits that can be gained. Before you take the time to sign the agreements, commit to the deal, and fork over your payment, however, you’ll need to consider the three factors mentioned above to ensure that everything goes smoothly down the line!
We’re a legal firm in Milton that specialises in servicing commercial law, brand protection, and corporate law needs of Australian businesses and entities. Get in touch with us today to learn more about how we can best serve your legal needs!