Starting a new business can be extremely frustrating if not handled properly, and the risk is high. Reportedly 80% of new businesses fail in the first three years due to factors such as poor location, low product quality, undercapitalisation, and lack of management skills. However, there are things you can do to increase your chances of success. For example, purchase an established business! A mature business offers the advantage of providing you with a proven location, existing customer base, and product. The key is to look for a business that is established but has potential for growth. That way, the business will be affordable while providing the opportunity to significantly increase your profits. Also keep in mind that most business owners will be willing to train you in the daily operations of the business, thereby helping to further reduce the risk.

So, how do you begin to pursue your dream? The answer is to make sure you have a solid understanding of the process involved in the purchase of a business and to follow it. To get a better understanding of the process, let's run through a few of the more important aspects of a typical transaction.

1. Make A Commitment to Purchase A Business
2. Analyze Buyer's Needs & Desires
3. Tour Business
4. Write Offer
5. Present Offer and Explain Buyer's Qualification
6. Offer is Accepted
7. Inspect Books
8. Contingency Removals
9. Negotiate Lease Terms
10. Execute Lien Search
11. Buyer Assumes Notes and Equipment Leases
12. Count and Price Inventory
13. Close Deal

First, you must be totally committed to purchasing a business at a price and terms consistent with the marketplace. Once this commitment has been made, it is then time to consider using the services of a good, knowledgeable business broker. Remember, purchasing a business is even more complicated than the purchase of a home, and most of us would not attempt to buy a home without the assistance of a qualified real estate agent. Westcon Business Brokers, the largest on the KwaZulu-Natal South Coast has the experience and objectivity to answer questions and match your needs, abilities, resources and interest with the right business. Keep in mind that if you elect to use a broker, choose one with a proven track record and one that you feel comfortable with. You will be required to sign a non disclosure agreement promising to maintain confidentiality for all the information provided to you on the business discussed. The business broker will also explain the process involved in buying a business and request information on your background and financial history.

Now, you are ready to tour businesses with the broker. When you find a business you like, the broker will begin to familiarize you with the important factors associated with the business: gross sales, rent, terms of purchase, etc. The business broker may arrange a meeting between you and the sellers to discuss how the business operates.

The next step will be to write a purchase offer and present the offer to the seller. At this point, the business broker will share information on your background and pertinent financial history with the seller. This information will include your experience and specifics of how you arrived at the offering price, terms and conditions, the seller will either accept the offer or submit a counter offer. When both parties have agreed to the terms, you will be allowed to inspect the financial records of the business to determine if everything is in order. At this point, all of your questions will be satisfactorily answered per the contingencies of the offer or the deal can be cancelled.

The lease assignment is the next step in the purchase of the business and is usually the most time consuming due to the involvement of the third party - the landlord. The broker, seller, and you will work with the landlord to arrange an assignment of the current lease or to create a new lease with new terms. Once this occurs, you will provide all necessary paperwork to the closing agent or attorney, who will run a lien search. If the lien search finds everything in order, any notes or equipment leases will be assigned to you or paid off. Finally, arrangements are made for you and the seller to count and price the inventory. When this is completed, documents are signed and the deal is closed.

With knowledge, a little luck, and a good business broker, the process of purchasing a business can be surprisingly simple. Utilizing a good business broker can help you to drastically reduce the time it normally takes to complete a transaction, bring a dying deal back to life, reduce your risk, and protect all parties involved.

If you, as a potential buyer, follow these steps in purchasing a business and utilize all the formation available to you, you will stand a much better chance of fulfilling your dream of owning a business. More important, if you want to continue to succeed after purchasing the business, the day you sign closing papers and become the owner, your mind set must change from buyer to seller. Whether you plan on selling the business in one year, ten years, or never, strategies to maximize the value of the business are good management practice and should begin well before you ever decide to sell.

First and foremost, begin to position the business for sale from the day it is purchased. To build long-term value, in addition to ensuring short-term profits, it is essential to keep good financial records. This is important throughout the life of the business, but is especially critical when you are trying to sell your business. If the business you purchased is a franchise, care should be taken to learn the franchiser's requirements for resale. The requirements are usually listed in the franchise contract.

Second, when the decision has been made to sell the business, determine the fair market value of the business. Business brokers are usually the best source for determining the value of your business since they have the most complete and current information on actual business sales and pricing formulas.

In a recent analysis of a large firm's sales (400), it was found that the seller who offered their business within 15% of the firms estimated market value ended up selling within 2% of the average market value. Sellers who offered their business for more than 40% over the market value ended up selling for an average of 26% below the market. By asking too much, they got less than they could have.

Furthermore, continue to manage your business for optimal performance. A common mistake made by sellers is to pay less attention to the daily operations of the business once they decide to sell. To maintain maximum value, continue to run your business with complete dedication and keep up your inventory, maintenance, advertising, and customer service levels and again, you must maintain confidentiality. Your business' value could suffer if employees, customers, or suppliers know your business is for sale.

Finally, negotiate effectively. Don't let inflexibility prematurely end a deal with a qualified buyer. At this stage, you benefit tremendously from the professional help of a business broker who is trained to develop creative (and responsible) terms that both help close the deal and ensure all interests are met.

Not surprisingly, with access to good information and the help of qualified professional business broker, buying or selling a business can be a less stressful experience and become one of the most fulfilling events of your life.

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