Business

Business

Advantages that an entrepreneur who buys a business gain over one who starts a business from scratch

A proven method

Large companies regularly use a proven method for growth, while limiting the risks: They proceed with the acquisition of competitors or companies in related sectors. This procedure can also be used by SMEs. The main advantages are:

Increase the customer base

Despite the duplication that may occur, the acquisition of a business can quickly and instantly increase the number of customers. These clients may be served on the facilities of the buyer, seller or by the acquisition of new assets if necessary.

Increase profitability

A rapid increase in sales following an acquisition, optimizes asset utilization up and support services company that performs the acquisition. Economies of scale and rationalization appropriate activities will improve the profitability

Limit the financial risks

Financial risks will be better controlled in the case of an acquisition in the case of another form of expansion where it will increase sales after making capital investments. An acquisition brings to both customers and assets to serve them. It will be possible eventually to increase profitability by streamlining asset utilization

Recruit experienced staff

A business acquisition can instantly recruit experienced staff which is a very important advantage, especially in sectors suffering from skills shortage.

Valuation of assets

As in the America and international practice, the procedure for the valuation of assets actively used a comparative, income and cost approach (Kao, 1991):

The income approach is fundamental to the implementation of the investment. Its use implies the study of the prospects of the asset and its potential profitability. The income approach includes the use of two methods - discounted cash flow method and the method of capitalization of profits. With their help, estimated value of cash flows, if possible (at the time of crisis or instability in the economy, this figure often becomes a negative value, which makes it impossible to assess by this method).

A comparative approach helps to evaluate the assets, providing a value based on comparison with the price of similar assets on the market. It is relatively fast, but highly inaccurate because it does not take into account individual characteristics and features - even more so, its use can only be formed when the market because the information about the transactions should be taken from reliable sources;

The cost approach determines the value of assets as incurred in its creation or acquisition costs, considering also the repayment of all liabilities. With this approach, assessment of assets in the commission of the liquidation procedure, since it lets you know that the cost of which will be net of expenses after liquidation.

The main predictions regarding the future use of assets, their effectiveness, are arranged on the basis of rigorous macroeconomic analysis and the psychology of price expectations that are generated from potential customers and stakeholders, investors, market.

Steps involved in the right way to buy a business

Stay in familiar territory

Do not fall into the trap of buying a particular company because it seems to be a "sure ...