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How to buy a good running business in India?

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Buy a business

Buy a good running business

Business is a big thing, really. The failure rate at startups is significantly higher. According to data from the Office for Labor Statistics, 20% of small businesses fail in the first year and 50% in the fifth year. Given the dire environment of the market, entrepreneurs have found a new way out and more willing to buy a good running business than starting a new one.

This practice of buying existing business is becoming the most preferred business tactic in the market. So, to make a profit, avoid the initial labor of starting from zero and continue the trend.

Keep the below-mentioned points in mind to buy a good running business

1. Explore Area of Interest

When planning to buy a running business you first need clarity on where your interests and strengths are. It is always advisable to start with the known first rather than entering into the unknown. So, if you have worked in the industry, you should be familiar with its basics and put the knowledge to work, then it would be profitable to buy businesses in the same industry. If you are interested in careers that do not work, do thorough market research and seek expert guidance when needed.

2. Check Licenses, Permits and Paperwork

If you are wondering the question of “how to buy a business”, especially a good running business, if you find one, you must first make sure that it has all the business licenses. This business you expect must operate in accordance with business license laws and be allowed to remain open, especially if it is owned by highly regulated businesses.

3. Environmental and Zoning Law

The reason for selling a business may have received official orders to close it, but will the owner say? You never know. Therefore, it is necessary to check whether the business you want to buy does not violate any business and residential zone rules and regulations. This is especially important when buying businesses such as bars and nightclubs.

4. Evaluate the Business

Do thorough background research on the business you are going to buy. When buying a business, the biggest offers to the buyer are the assets that come with it. These assets must be legally transferred to you or you can ensure that the price of the expired assets is not borne. Other things to look for to make an accurate assessment of the business include:

  • Tax Returns
  • Balance Sheets
  • Cash Flow Statements
  • Sales Records
  • Accounts Payable
  • Debt Disclosures
  • Marketing Costs
  • Status Of Inventory
  • Client History
  • Market History
  • Financial Records
  • Seller Customer Relations
  • Location
  • Employee Chart

5. Prepare the Letter Of Intent

Once you have checked the zoning regulations, carefully evaluated and confirmed that it is safe to buy an existing business, you can move on with the financial negotiation process. After verifying the mutually agreed price taking into account the assets and liabilities, you should prepare a letter of intent (LOI). It contains the price proposal and terms and conditions of the sale. It is a step that performs the deal.

6. Transference of Business

The LOI was prepared to inform the seller that the buyer is taking the contract seriously. Therefore, the next step in the process is to get the signatures and approvals from the seller or attorney with the help of a legal professional to transform the business. The legal expert will keep information about the things you purchased when creating the documents:

  • Tangible assets
  • Intangible assets
  • Intellectual property
  • Customer lists

Once you have purchased a successful business, you will receive the following documents as evidence:

  • Sales Receipt
  • Property Acquisition Report listed on IRS Form
  • Patents, trademarks and copyright

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