Commercial property is a very different ballgame from residential property. There are far more factors to consider, and the location is of utmost importance. However, unlike investing in residential properties, you can buy existing businesses and invest in improving something that already runs smoothly.
Buying an existing business is usually quicker and easier to manage. It’s far more accessible than starting from scratch, and assuming you have a large amount of money to invest at the beginning; it can be far more profitable in both the short and long term. Instead of investing in a property and building it up from scratch, you’ll see instant results because the business you purchase is already established and making a profit. Here are some things to consider when scouting out a potential business to invest in.
Are They Well Equipped?
No matter how established a business is, you need to assure that they can survive the next couple of decades. The most important factor of sustained growth is being well-equipped. You can’t run a business that lives in the now and doesn’t plan for the future. Are they using software and hardware that is scalable? Are they using credit card machines to allow customers to use a variety of payment methods? Do they have a recruitment team that’s capable of pulling in more talented workers?
Consider all these points and make sure that the business you invest in won’t die out after a couple of months. Fortunately, it’s not hard to analyse the business and discover flaws in the system. Patch these problems, and draw up a plan on how to improve the company.
Value the Business
Investing in a business from scratch is far cheaper than purchasing an established business. To make sure that you’re not getting ripped off, consider looking into some of these points to gauge how much a business is worth:
- Financial situation – are there any outstanding debts?
- Current performance – how many sales are being made? How much profit?
- The history – is this a new business, or does it have roots in the local area?
- Future plans – are there planned improvements already? Have these started?
- Competition – is this business highly ranked?
- Employees – how many are working currently, and what are their salaries?
- Why it’s being sold – if a business is running perfectly, why would it be sold?
Consider these points and hire a professional to help you value the business and its assets so that you can make a good judgement on how much you’re willing to spend. Keep in mind the golden rule: if a business is running smoothly, there’s no need to sell it. Make sure you understand why it’s being sold before investing so that you don’t run into nasty hidden surprises after the ownership passes to you.
Dealing with Employees
Once the staff find out there’s a new boss, get ready to answer a slew of questions. Why was the business sold? How does this affect our pension? Will our pay change? Will we get fired? There are a lot of legal issues that may arise if you decide to cut staff or replace existing workers with your own. Be sure to have a legal team ready for any situations that you might get into, and be sure to consult them before making a decision that will impact an employee.
You must log in to post a comment.