One way to simplify new businesses is by buying an existing franchise or business.
With franchising, you have a ready-made business system in place. However, buying an existing business or franchise offers the advantage of working with a proven product and concept that has already been developed.
In most cases, it is best to buy an established business or franchise than open one from scratch. You can acquire all kinds of businesses—mainly small to medium-sized. When you start with an existing business or franchise, you can improve the product and service offering rather than looking for clients. You can also find a proven marketing strategy that has worked before and focus your efforts on developing it further.
In addition to saving time in planning and testing out the market, buying an established business offers other advantages. It helps you avoid mistakes made by the previous owner, such as poor location of the building or ineffectual operations procedures.
When finding a business or franchise to buy, look for profitable companies without much additional effort because this means lower risk for you if there is any at all (such as franchises). Researching how much profit they give will help you identify if they are profitable.
In general, you should only buy businesses that can be successful even without your expertise in the field. This helps you profit further from the business and gives you more freedom in running your company.
Factors to consider before buying a franchise or a business include:
How much do I want to spend?
Consider how much money you are willing to invest in starting up your own business or buying an existing one. Start with estimating capital requirements, then evaluate possible returns on these investments. If there is not enough return, it may be better for you to start from scratch instead of buying an existing business. The purchase price is just one factor contributing to initial capital outlay when acquiring a new venture; another significant component is startup costs such as new furniture, equipment, and business licenses.
Are there growth opportunities?
An existing business or franchise can provide numerous opportunities to grow by offering new products and services. In contrast, a startup company may have limited growth potential because it has no track record.
Can the seller use me as their employee?
Even if you are buying an existing business for investment purposes only (such as passive income), this does not mean that you do not need to be hands-on at all in running the business—you still need to know how your money is being used. If a seller is willing to let you work with them while also earning profits from your contribution, then it offers more assurance of success than just buying in someone else’s business.
How established is the business?
When buying an existing company, consider how much work you will need to put into reviving it. Its overall health and history can be a good indication of its potential to grow further with your involvement. The longer the business has been operating, the better since it indicates that it succeeded in attracting customers despite being in operation for some time already.
Can I improve on/take advantage of any aspect of this business or franchise?
Even if there are no growth opportunities with an existing business or franchise, there could still be ways for you to profit from improving certain aspects of it, such as marketing strategy, product sales, and operations procedures. You could also find ways to reduce any recurring losses (such as high utility bills for a snack bar franchise).
How willing is the seller to go with me?
An established business may be facing problems that could affect its future success. In addition to needing assistance in daily operations, it could also benefit from your expertise (such as if you are an accountant or lawyer with experience dealing with tax law). You may even want the previous owner’s help in managing aspects of the business, such as marketing strategy and human resource management.
Are there competitors that already offer what this business does?
When looking at existing businesses, compare them with other similar companies to ensure that they have a competitive advantage over other businesses or are not far behind their competitors in terms of reputation. Access to clients or customers is also crucial since you need them for business success. Also, keep in mind that inflation and economic growth can affect your profit margins every year.
How easy will it be to find employees?
You may need to hire people when starting a new business or franchise, but an existing one should already have skilled staff to help you run the company. Consider what is available such as customer service representatives, warehouse workers, drivers, and production supervisors.
How XOA TAX can help
If you are considering buying a business or franchise, XOA Tax has services that can help. Contact us more for information.