You are ready to jump into the world of entrepreneurship, but what are the essential steps when buying a business in South Africa? Read on, as we briefly discuss some of the important aspects when considering buying a business.
1. Identify the Business Sector in Which You Want to Operate
You have developed certain skills in your particular career field. These skills can be put to good use in your own business. It is thus best to buy a business in the same or a related industry in which you have worked up to now. The contacts, expertise, and operational procedures with which you are familiar with can be to your advantage if you already know a particular industry. If you wish to buy a business in another industry, make sure that it is in a field in which you have some knowledge. Having a passion for what you do will give you the driving force to succeed.
The above said, your current industry may have a bleak future, so if this is the case, rather buy a business in a growing industry and in which you at least have some support from mentors, trade partners, or even the current owner of the business.
2. Identify the Business That You Want to Buy
Use a trusted business broker website or contact the broker directly to help you identify a suitable business. Once you have identified the business you want to buy, get in touch with the broker or seller. Never buy a business of which you have not seen the financials or verifiable figures. Also, be sure to visit the premises at least twice before putting in the purchase offer. Photos and information on paper can be deceiving, even if truthfully given. This is because we tend to see only that which interests us.
3. Due Diligence
You can either put down a deposit to give you time to perform the due diligence or make the purchase offer subject to the completion of a due diligence. This is the process in which you evaluate the business’s potential and determine whether it performs as stated or expected. You want to identify all possible problems and use the time to ask all the questions for which you require answers.
4. Final Offer to Purchase
Work with the business broker to put forward a purchase offer. You can also work with your attorney or accountant. Be sure to provide proof of your financial ability when contacting the broker or seller, if you want the seller to take you seriously. Be willing to sign a confidentiality agreement and to be vetted before the seller will give you access to their trade information and financial statements.
Never promise what you cannot deliver. If you plan to apply for finance to buy a business, start the process early. If the purchase offer is subject to finance approval, you have a legal duty to perform in terms of your finance application.
View our range of listings and get in touch for more information once you know which business you want to buy.