Buying a company: how to prepare

Have you ever thought about entering into the business world but don’t feel you have the foundations to do so? There is often a desire for entrepreneurship, but the process of setting up a business from scratch can seem like an almost impossible task. If this is the case, you may not have thought about a good option that is available to you: buying a company.

Buying an existing company that is for sale can be an opportunity to enter into business without going through the process of starting one from scratch. Have you ever been attracted to a company for sale? As in all choices in life, there are companies for sale that will fit your vision and your project and others that will not.

Knowing which company to buy can make the difference between taking the first step towards a successful business venture or, on the contrary, getting off on the wrong foot. Don’t worry: there are professional advisors who can accompany you in this process and advise you on the best choice. So that you can look forward to your business project with the peace of mind of knowing that you are not taking any wrong steps on your way to success.

We present a series of steps to avoid making mistakes when buying a company:

1.Identifying the sector in which you want to buy your company

The first step in buying a company is to define the type of company you are looking for. In which sector do you want to do business? You will need to research the medium and long-term prospects of the sector, look at the competition and pay attention to changes in regulations and laws. If you want to really get to know the possibilities of the company you want to buy and what the service they offer is like, apply as a customer to experience it first-hand.

2.Contacting the company for purchase

After thorough research the next step is to target the ideal company. You need to consider a budget, the size of company desired, the location and annual turnover and, of course, whether you are going to be successful. You should not offer a deal that you cannot deliver.

If you are unclear about how to go about this whole process, it is best to hire professionals for the negotiation.

3.Opening negotiations when buying a company

When the time comes to negotiate the purchase of the company, a detailed picture of the company and the sector in which it operates is already available. Negotiations with the owners can then begin in order to reach the best deal for both parties. The first point of negotiation is the price, based on a valuation. Then a plan must be formulated to bring the transaction to a successful conclusion.

4.Valuation of the company

The valuation stage of the purchase of a company is the most important to ensure success. Assets often make up the largest part of any valuation. These can be the value of property and real estate or also machinery and equipment, depending on the company. The importance of turnover, profitability or current contracts should not be overlooked either.

5.The sale and purchase agreement of the company

The finalisation of the sale and purchase agreement (SPA) marks the final stage of the company purchase process. In the meantime, the heads of agreement set out in broad, non-legally binding terms an overview of the purchase. A purchase and sale agreement will grant both parties their legal obligations.

6.The payment 

There are several options regarding the payment of the purchase of a company, depending on the size and scale of the purchase.

Payment for a large-scale purchase, such as a multinational purchase, can be more complex in operation, with multiple sources. For a smaller scale purchase, the most common method is a direct payment.

Payment may come from private means, investors, banks or lending companies, among others. Sometimes the current owners may give up full control of their business at the sale, but only take a percentage of the full value upon completion, in exchange for an ongoing share of the company’s profits.

After these steps, with the final documents completed, the contracts signed and the payment agreement in place, you will have completed the purchase of your new company.

This process is prior to embarking on your entrepreneurial dream. It can be a slow, strenuous and labour intensive process. It can often wear the buyer down and sap his or her enthusiasm and initiative. But you don’t need to waste your energy on this process.  There are companies like ONEtoONE, which can guide and accompany you, so that you can dedicate all your passion and enthusiasm to your business project, ensuring that you have acquired the right company to make it a reality.

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