How To Buy A Business Or Start A New One

Entrepreneurship comes with a wide range of responsibilities starting from the beginning. Whether you buy a business or launch a new venture, preparing for the road ahead is essential. Both ways lead to the same result but differ in their approach. If you have a brilliant idea that needs your unique vision, you can become the founder of a start-up. Conversely, if you wish to take forward the legacy of an established brand, you can acquire a well-known business for sale in South Africa.

However, before taking the plunge, it is essential to consider a few factors to avoid regretting later. It helps to make the right decision when kick-starting your entrepreneurial journey. Here is everything you need to know about buying or starting a business.

1. Choose the Right Industry

Passion is the driving force behind a successful brand that keeps the leader motivated and determined to excel. Aspiring entrepreneurs should choose the right business for acquisition or start-up. Identifying an industry that matches your interests or professional experience is vital when looking for an acquisition. In addition, it must be a high-performing sector that contributes to the economy substantially.

If you are starting up, you need to be careful about choosing the right business. Stepping into an unknown terrain can bring unexpected challenges that can lead to disastrous consequences. The percentage of business failures of start-ups stands at 70%-80% in South Africa. Thus, you must evaluate the potential of the idea and its prospects before taking the final step.

2. Create A Business Plan

Once the industry and domain are selected, the next step is to prepare the business plan. Although an existing business has the document in place, the buyer needs to adjust it because they will set new targets. Also, business plans need to be revised after a few years, depending on the financial status of the entity and the economic conditions.

On the other hand, if you have a start-up, you need to prepare the document from scratch. It must have details about the type of business, structure, products, vision, goals, management team, budget, financial projections, and marketing. It is needed to create a blueprint for the organisation and make the employees align their goals with the business objectives.

3. Secure Funding

After the business is planned on paper, it is time to get the funds to give shape to the idea. The business plan comes in handy for start-ups that need financing. Building a company needs a lot of capital. Entrepreneurs can apply for a small business loan or leverage government grants to get the ball rolling. Moneylenders and investors will ask for the business plan to assess the viability of the business idea. Thus, convincing them with a solid pitch is essential.

Those who wish to purchase a business for sale in South Africa also need financing for the deal. Thus, they should identify the funds that can be secured for the acquisition and start looking for business opportunities that fit their budget.

4. Due Diligence and Market Research

Buying a business requires in-depth research of the entity to analyse its profitability and future success. Ask for the financial documents for the past few years and hire an accountant to check the stability of the venture over the years. The professional must evaluate the financial health of the business and its cash flow. They should also determine the reason for the sale and the accurate value of the business.

Sellers can hide information at the time of the sale to avoid getting a lower price for the entity, such as debts or unpaid loans. Thus, it is vital to perform due diligence. In the case of a start-up, the entrepreneur needs to take up market research to identify the best location with a sizeable population of the target audience.

5. Register the Business

Although registering is not necessary, it is helpful to get good clients and expand the business in future. The company should be registered with the Companies and Intellectual Property Commission (CIPC) to get a business loan and set up a separate bank account. It helps build credibility and easily find talented employees, investors and partners.

You must decide the type of business you wish to set up. Depending on your needs, you can start a sole proprietorship, public company, proprietary limited company, or partnership. Also, you need to choose a suitable name for the entity and provide all the required documents to get it registered. However, if you are buying a business, you need to draw a closing checklist which includes closing the business account, informing customers, employees and suppliers about the change of ownership, etc.

6. Hire A Team

A talented team is the most significant part of a business. A start-up needs to hire employees for different roles and train them to understand the vision and goals of the entity. These people must be chosen carefully because they are responsible for the accomplishment of the targets.

An existing business already has a well-trained team in place, but some might decide to leave because of the change in ownership. Thus, it is essential to identify the key people who are needed for daily operations and work on retaining them. Leverage the presence of the team for a smooth transition phase.

7. Start Marketing or Branding

Marketing is the backbone of a business. A start-up has to build a new brand that requires a huge budget for promotions that include all media channels and platforms, such as email marketing, social media, paid ads, newspaper ads, signage, radio and TV ads, etc.

An established business has everything in place, but marketing is an ongoing activity. The entrepreneur needs to continue with the marketing strategy and communicate the changes that are taking place in the company to the customers. Maintaining transparency and honesty is imperative to keep the target audience informed.

Conclusion

Buying a business or starting a new one needs conviction, determination and resilience. Whether you build something from the ground up or acquire an established venture, you must follow the steps mentioned above to start on the right foot.