Things to Consider When Taking Over a Business

In many parts of the world, you can find sites that list businesses for sale. If you are a budding entrepreneur and looking to take over a business, what would you look for as signs of a good business? Here are some business valuation tips for you if you are looking to buy over a business.

1. Years of Establishment It takes time to build a reputation and a loyal customer base, and old businesses have the experience and loyalty that a new business does not have. So look out for how many years the business has been operating. Also, if it managed to survive so long, something must be right about the business. (unless you feel that the product/service is going out of trend)

2. Look for online reviews/comments Search online for any feedback or reviews about this business. This will help you gauge its reputation and customer satisfaction level. You definitely want a business that has a good reputation as that is gold and more valuable than anything else. Bad reviews can be very hurtful to sales, and definitely something to avoid.

3. Supplier / Customer Power For those of you not familiar with Porter's Forces, it is extremely crucial the competitiveness of a business that all the power is not held by either the supplier (e.g. when there's only one supplier for your goods), or the customer (e.g. when there's only one or very few customers to your goods. As a business, you want to have multiple suppliers and a large customer base, so that you can fall back on various suppliers when prices or supply fluctuate.

4. Competition Is competition in this niche fierce? Remember competition determines everything - how much of the market share you get, advertising prices, SEO. The more competition you have, the tougher it will be for you to make a profit in this industry/niche. One good measure to see if you will get a lot of competitors is by looking at the barriers to entry. Is this a business that requires little expertise / start-up capital so everyone can just join in anytime they want? (e.g. opening a hot-dog stand versus opening an architect's firm). Choose something that has some barrier to entry - e.g. requires some form of expertise that you have but others don't. That will be your competitive edge.

5. What's Included in the price When you take over a business for sale, be very clear about what's included in the price of the sale and what's not. Are there fixed assets like land/property or inventory that comes with the price? What about liabilities like Debt or loans? Be very clear about these as they will affect the value of your business.

That said, if you do your due diligence right, there are many businesses with potential that are available for taking over, and who knows, one might be just right for you.

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