3 main risks and 5 tips when buying an existing business

Nuances when buying a business

The acquisition of registered enterprises with an existing development history may be associated with the negative influence of certain factors:

there is no confidence that the existing technological lines have been modernized and will not require urgent replacement;
a situation may arise when the current lease agreements expire, and the agreement on the terms of their extension or renegotiation has reached a dead end or has not begun;
employees may have a low level of qualifications;
risks of hidden debts or damaged relationships with key counterparties, which in the future will significantly complicate doing business.

An additional difficulty is finding a business seller.

Note! A well-functioning business is sold “quietly”, without mass circulation of advertising in all media, so as not to scare contractors and clients.

The search for a suitable ready-made project for purchase can be done through advertising boards in business publications, brokerage companies and the Internet. Particular attention should be paid to personal contacts - through information received from friends and acquaintances, you can find a suitable investment option.

Before making a final decision to purchase a particular enterprise, it is necessary to find out the reasons for its sale:

Relocation of the company owner, implying loss of control of work processes.
The emergence of controversial issues between the founders without the possibility of finding a compromise solution.
Loss of interest in business, desire to retire.
A serious illness that makes further management of the enterprise impossible.
Urgent need to find a large amount of cash.
Disposal of non-core assets, which is typical for large holdings.
Low business profitability.
Inability to cope with a leadership role, lack of relevant experience.

Opening a turnkey business in Moscow

Do you have an idea to start a business, but don't know how to make it a reality? If the answer is yes, then we are on our way!

assures the reader of these lines: nothing is impossible, there are poorly set goals and incorrectly chosen tools for achieving them. To avoid this, you should get rid of the fear of asking for help. But you need to ask someone who has already gained his own experience, “hit his mark” and learned how business works in Russia. We share our experience!

Our team is made up of active entrepreneurs with more than one successfully implemented project behind them. Dozens of enterprises built from scratch have allowed us to accumulate vast experience and develop a base of trusted contractors, which we offer you to take advantage of.

Carrying out a project on their own, an investor often encounters delays in completing work, poor quality of workmanship, and can get bogged down in bureaucratic procedures. As a result, the launch of the project is postponed, a lot has to be redone, and extra money is spent, including rental costs and staff salaries.

When working with you, you will avoid these problems: we are confident in the people we work with and are responsible for deadlines and quality. As a result, even if you pay us, you will save in the long run.

What does it offer?

The opportunity to organize your own business, guaranteed to save on investments.
No risk.
A completely ready-to-go business scheme that will begin to generate profits in just a few months.
A way to try yourself as an entrepreneur and learn effective working methods.
No need for large expenditures on advertising and marketing.
A quick start in any field of activity.
Guarantee of meeting deadlines at each stage of the project implementation

What kind of business can we offer you?

Choosing the right idea to start a business can be quite difficult for a new entrepreneur. We advise you to think about popular ideas that are time-tested and quite simple to implement. Do not be afraid that in this case your store or restaurant will be similar to a hundred others; with the right approach, any business can become unique.

What can we offer you?

Opening a grocery store. This type of activity brings profit at all times. Grocery stores are in demand anywhere, be it a residential area or the city center.
Opening a pharmacy. There is always a need for medicine and it is no less than a person’s need for food. Some people get sick, while others make money from it.
Opening a hotel or inn. According to statistics, 60% of guests prefer large hotels, 40% prefer small hotels. Inexpensive hotels with a good range of services are always in short supply.
Opening of a cafe. The success of this business depends mainly on three factors: advertising, a good menu and service. So-called “interest-based” cafes, designed for a certain circle of visitors, are now gaining great popularity.
Opening an online store. E-commerce is a new and rapidly growing business area. Opening a store on the Internet will cost several times less than a regular supermarket; the client does not need to leave home or wait in line.
Opening of a beauty salon. A well-organized beauty salon opened in the right place can pay for itself within a year.

We can offer you other ideas. But in order to achieve high profitability, you need to entrust the work to professionals who can thoroughly think through and calculate everything. “Turnkey startup” - we give you the key to a successful and secure future!

How to avoid missing danger signals

The execution of a business purchase transaction must be thoughtful and balanced. It is first worth analyzing the financial condition of the proposed acquisition target and identifying its strengths and weaknesses. You can carry out comprehensive monitoring yourself or through analytical firms.

Particular attention should be paid to situations that may pose a danger to the project:

The seller insists on an urgent transaction strictly tied to a specific date.
Basic financial and legal information about the enterprise is hidden.
The reason for selling the business is not stated or the arguments given sound unconvincing.
The seller was caught providing false information.

Where are the hidden risks?

Serious risks may lurk in a competitive environment. Competitor research will help identify brands that have great potential and, in the short term, are capable of squeezing the business project being sold out of the market.

An additional risk factor is the location of the enterprise. If it is located at a considerable distance from its clients and is difficult to find, then one of the first steps after completing the transaction will be to relocate the company. This is very expensive, so you should either insist on a significant discount on the cost of the business or refuse the deal.

Remember! The financial condition of a business can only be assessed using official documents; you cannot rely on reviews, verbal guarantees and opinions of unverified experts.

You can protect yourself from debt obligations that were not declared by signing a special agreement on the eve of the transaction. The essence of the agreement is a guarantee that the company has no debts that are not recorded in accounting. Even if any are subsequently identified, the purchased business will not suffer from them, since the signed agreement places all responsibility for such loans on the previous owners, and they will have to pay off the loans.

Important! The agreement on the absence of hidden debts must be signed by all founders, including the general director, otherwise the document loses legal force.

How to get around?

To mitigate the risks when purchasing an existing business, you can use the following techniques:

preliminary purchase of shares;
conversations with employees;
checking the company's obligations;
preliminary market research;
experience in the industry.

If it is not possible to join the company’s affairs immediately, you can purchase a block of shares. This way you will become its co-owner and gradually learn the specifics of the activity. However, this will incur additional costs, both financial and time.

Talk to the company's employees. Preferably with those who have not been introduced to you. They can give the most objective assessment of the state of affairs. If the seller sets a short deadline for the purchase, then it is better to forget about this acquisition. There are enough similar offers on the market.

Market analysis will help assess the organization's prospects. For example, by studying the state of demand, you can understand what kind of profit the company claims in the future. The company's competitive environment is also important. If its level is high enough, then the seller may not be able to survive in the market. In this case, the purchase is not advisable.

Despite its advantages, a ready-made business has many risks. However, with proper due diligence, you can avoid pitfalls and acquire a profitable company.

Documentation of the transaction

The key document when completing a business acquisition transaction is the purchase and sale agreement. It must cover the following issues:

subject and object of the transaction, listing the participants from the list of sellers and buyers, bringing the final price of the enterprise;
the presence or absence of debt obligations of the company with their detailed decoding and clarification of which of them the buyer agrees to accept;
factors that can affect the value of the price in the period of time between the moment of signing the contract and the end of the legal registration of the transaction;
guarantees from the seller regarding the reliability of the information provided by him about the company;
a set of penalties and other sanctions for violation of one or more clauses of the contract;
the amount of the security deposit.

A business registered as an LLC can be acquired in several ways:

Bankruptcy with subsequent liquidation of the enterprise and its redemption at auction. The method allows you to optimize the price of an object, but there is a high risk that during the bidding a serious competitor will appear who can outbid the price offer.
Entry into the founders with further alienation of shares and exit of the previous owners.

The second option is the most optimal. To register as a new LLC member you will need:

application in the established form P13001, certified by a notary;
decision of the founders to increase the capital (if there are several founders, we will talk about drawing up minutes of the general meeting);
updated version of the Enterprise Charter in 2 copies;
a receipt confirming payment of the state duty;
application of a third party (prospective buyer) to accept him into the company;
a bank document confirming the payment of the entire contribution amount to the management company by the buyer (new LLC participant).

At the next stage, the withdrawal of the former participants of the LLC from its composition is formalized. For this purpose the following documents are prepared:

completed form P14001 (notarization is required);
a statement drawn up by each founder confirming their withdrawal from the company;
minutes of the general meeting on the subsequent redistribution of the released shares.

To support the transaction with a notary, purchase and sale agreements with the provision of offers from participants will be required.

Note! Notarization of all stages of the transaction and documentation occurs with the direct participation of both parties - the seller and the buyer.

Turnkey business – what is it?

To be honest, the name “Turnkey Marketing” would be more correct (and I even like it better :-)).
But, I’m afraid that this does not so succinctly describe the format and scope of work, so we still settled on “turnkey business”. Although business, of course, involves recruiting employees, renting premises, and selecting suppliers... Here we are talking more about marketing :-). In general and briefly, the service includes everything that needs to be done to get your first customers: from analyzing competitors and audiences, to developing a website and launching the first advertisement to attract customers and make your first real sales.

At least 3 specialists are working on launching your business, plus, of course, me. I am sure that this is an advantageous offer for those who have no business experience.

Note: The offer is not valid for all types of businesses (only for businesses for which there is real demand on the Internet). Contact me to find out if we can help specifically in your area.

Step-by-step guide to buying an existing business

Step 1. Business valuation

At this stage, the value of the business is assessed, its financial statements are analyzed, a profitability forecast and a list of necessary investments are drawn up. The seller must provide inventory reports, statutory documents, permits, and financial statements. A study of the current financial condition can be done independently or by appraisers and auditors.

Step 2. Selecting a method for transferring ownership rights

Assessing the advantages and disadvantages of different methods of transferring property rights, analyzing the degree of importance of all factors for the parties involved. The choice of one method or another will depend on the time frame allotted for completing the transaction and the total number of participants in the LLC.

Step 3. Re-registration with the tax office

If the conclusion of the transaction is accompanied by a notary, then a separate clause of the agreement with him can stipulate the submission of documentation to the tax authorities without the participation of sellers and buyers. In case of independent re-registration, this function is assigned to the general director.

First, documents are submitted to increase the authorized capital and the emergence of a new LLC participant. 1 month is allotted for this from the date of deposit of money by the additional participant. The tax office processes documents within 5 working days. Next, documents are submitted indicating the withdrawal of the participant or participants from the LLC, who will undergo the registration procedure with the inspectorate within 5 working days.

Step 4. Obtaining new documents

This stage involves receiving a sheet for making changes to the Unified State Register of Legal Entities with a certified original of the updated version of the charter. This can be done in person or by mail, if at the time of submitting the documentation you indicate the postal address for sending.

What documents were provided to us for review?

1. Cost of business Product – 700,000 rubles. Equipment – 150,000 rubles. Promotion – 150,000 rub. Total – 1,000,000 rub.

I immediately marked the question that needs to be asked about this calculation. — Confirmation of the cost of goods and equipment?

2. Payback 1st year 541991 rub. 2nd year 380061 rub. 3rd year 77949 rub. Amount 1,000,000 rub.

Then it became very interesting how this is calculated and WHY should the profit be less and less every year?

3. Sales volumes

When you look at the table, you can see that the whole column is the planned revenue, and you can only plan on the basis of one month, since the store operated for 1 year and 1 month. In July 2007, revenue increased 1.5 times compared to July 2006, and this coefficient was applied for almost the entire year! Starting from December, the coefficient was slightly lowered, it is not clear for what reasons, maybe my conscience woke up...

4. Sales and surplus of goods

From this table it turns out that sales by brand are very heterogeneous and there is a large surplus of goods in the warehouse. The store owner told us about this that at the beginning of the store’s operation the assortment was chosen incorrectly, large purchases were made, but now she promised to tell us all the information about what is better to buy and in what quantity. You can see the discrepancy between the total cost of the goods in this table and the first table, where the price for the goods is indicated at 700,000 rubles. I noted this to myself as another question.

5. Cash flow

This table was presented to us when the owner of a lingerie store claimed that the profit was 45 thousand rubles per month (according to the table, this is indeed the case). But I didn’t immediately pay attention to the date; it turned out that this was the planned profit for the end of 2007-2008! The entire calculation was done taking into account the coefficients from the 3rd table. We found another error in this table; in the fixed expenses article, tax expenses are not indicated.

Having carefully reviewed all the tables, we did not see information about the profitability of the past year. There were only assumptions about what revenue and profits should be in the future. There were inaccuracies in the tables we received, and some information raised questions. Naturally, this situation did not suit us and, to be honest, all my optimism was gone, but the location of the boutique was very good, so my husband and I decided to meet with the owner again to clarify all the issues and then make a final decision. I called the owner of the store, we agreed to drive up to the store again and negotiate.