Buy a Small Business – Make a Big Investment

“Do Something Today That Your Future Self Will Thank You For”

Are you looking for new and exciting investment opportunities for your money? You are not alone. Investors all over the world today are on the lookout for something more engaging and entrepreneurial than traditional investment options like stock, bond, shares, deposits and mutual funds?

Did you know? Putting money in a business is the new age mantra to making your money work hard while experiencing a deeper and more fulfilling engagement in your investment. We have worked closely with thousands of business owners, investors and business buyers over the last 5 years, and in this article, we share with you the various ways in which you can benefit by investing in a small business or buying one.

  • Multiplier Effect – Invest in the equity of a small business to get attractive capital gain. What does this mean? Essentially, an investment made for capital gain does not pay out a steady stream of income. Instead, it waits for the value of the business to multiply so that the value of the investment made by the investor also multiplies proportionally. This implies a longer gestation period, but also a much larger return potential. For example, you can invest in a small business whose value will potentially double or even triple in a few years. When this happens, your investment also doubles!
  • Periodic Returns – If you are interested in immediate, periodic payments instead, go for debt investment in a small business. A debt investment is like a loan, but an investment all the same. A predefined interest rate is agreed upon between the business owner and the investor, and annualized pay-out streams of repayment are disbursed periodically. The upside? You do not have to wait for the business to start minting good money, and a debt investor usually has preference above all other investors! This post can help you decide if you should buy a business or invest in one.
  • Diversified Portfolio – As Warren Buffet once said, when it comes to investment, “one should never put all one’s eggs in one basket.” Instead of only sticking to the conventional investment options, bring a fresh flavor to your portfolio by investing in a high-growth small business. Let your money work hard for you as you reap the benefits of a diversified investment basket.
  • Network Effect – Not all returns are tangible. Apart from the direct monetary rewards of investing in a small business, you can also grow your professional network through your interaction business promoters, consultants, deal professionals and co-investors in the business. Unlike other investments which tend to be passive, investment in a small business is a high-involvement one that also makes your journey exciting and the returns manifold. Don’t miss this interesting post that tells you why business partnerships matter.

At IndiaBizForSale.com, we provide first-time investors with thorough support and handholding and also help you connect with professionals to help you with the transaction and risk-management. We have thousands of businesses on our platform which can be filtered by industry, location, asking price, credibility and so on.

Pursuing Ownership in a Small Business Towards the End of the Financial Year

If you are looking to dive into entrepreneurship and run your own business, you have two choices before you – one, to start the business from scratch – which is the more traditional approach, and two, to buy an existing business – which is the new age mantra for starting a business quickly and easily.

Did you know? Buying an existing business can lead to a better visibility of immediate cash flow, proven financial history which makes it easier to secure loan and investment, established network of customers and suppliers, well-defined market for products and/or services, and an experienced team to rely on.

As a prospective buyer, you may believe that all months of the year are equally important when buying a business, but the truth is that some months of the year are more favorable than others. The last couple of months in a financial year are often believed to be the most favorable months for buying a business.

Let us tell you why?

  1. Visibility of Last Year’s Performance – The potential buyer gets a very good idea about annual sales, operating profit and net profit of the small business being sold. More than three quarters of performance available makes it easy to extrapolate annual financial performance. This also makes it easier to perform due diligence of assets, liabilities and other financial accounts.
  2. Cashflow Overview – Potential buyer has reasonably a good idea about the surplus cash flow that his existing business or profession is likely to generate during the year. Payments related to buying a business can synchronize the timings of cash flow generation and utilization.
  3. Tax Benefits – There are possible tax saving opportunities if a loss-making business is acquired and merged with a profitable business. It becomes easy to quantify possible reduction in tax liability if the loss-making business is acquired towards the end of the financial year.
  4. Motivation of Business Sellers – Business sellers are likely to be more motivated to make a transaction around this time of the year and make a fresh start in the new financial year.

As we draw the curtains on Financial Year 2017-18, it is an excellent opportunity to close a business transaction (Mergers & Acquisitions, Business Exit, Raise funds, Investment Opportunities) that you have been waiting for or to start preparing for a great deal in the next year. Remember, it’s never too late or too early to seize a business opportunity – make the best of your time and resources!

Credit: This article is written by Prof. Mayank Patel, he is the valuation and financial planning expert at team indiabizforsale.com’s advisory service arm. He is a professor at EDI, Gandhinagar. He is also a qualified investment advisor. 
B. E. (Electrical), M.B.A.(Finance), PGD in Treasury & Foreign Exchange Management, CFA(USA).

Should You Buy a Business or Invest in One?

If the idea of buying a business or investing in one excites you – you are not alone. Thousands of first-time buyers and investors join the crowd every year. For some, it is the idea of testing their entrepreneurship acumen in an existing business, while for some it is about making their money work hard. However, for many people, the decision is not easy to make – should you buy a business or invest in one?

We have worked with thousands of business owners, buyers and investors over the last few years and have closed multiple deals – both in business buying and investing. In this article, we will share a few practical insights from our team to help you understand the varied implications of buying and investing in a business. We recommend that you begin by asking yourself the following questions – the answers will help lead the way towards the most suitable opportunity for you.

  1. What is Your Primary Objective?

Are you looking for complete ownership, control, and a deep-dive into entrepreneurship? Are you excited about building your dream venture? Do you want to be your own boss? If the answer to all of the above is ‘yes’, then buying a business is more suitable for you. Investors are limited in terms of the amount of control and decision-making power they exercise in a business. Of course, there are various rights of an investor that you can exercise to significantly step-up the amount of control you have – but the owners are still going to have the final say and a much higher involvement in running the business.

  1. What is Your Professional Background and Industry Experience?

Do you have some experience in the industry to which the business belongs? Do you have prior experience in running a business – either first-hand or through a family member? Do you have adequate network in the relevant domain? If yes, then buying and running a business on your own will be a lot easier and more appropriate. However, if you are not sure about your background and experience being a good fit for the business, then investing in it might be a sound proposition.

  1. What are the Resources at Your Disposal?

Resources are critical when it comes to running a business. Does the business have an existing, well-established team, or do you have to build one yourself? Is there a loyal client base that you can rely on? Are the distribution networks on auto-pilot or will they require your constant supervision? Is the raw material coming steadily from an assured supply base, or is vendor management going to be a constant headache? If most of these pieces are sorted out, buying is a lucrative possibility. However, if the business is of high potential but still needs a lot of fixing, it might be better to invest your money and help the owners figure it out with whatever you can.

  1. What Are Your Existing Commitments?

In reality, the decision to buy or invest in a business is not isolated from other decisions in one’s life. Contrary to popular belief, there is no ‘right time’ to buy or invest in a business. There are no rules – anyone can put money in a business at any point in time, provided their existing commitments are in sync with the decision. Having a wonderful day job that you absolutely love? Invest in a business. Looking for a career transition? Consider buying your dream business. Have significant financial commitments towards your family? Start by investing in a business – consider buying one later. Looking to build an enterprise that will sustain your family for generations? Go for buying a business. These are just a few examples – the best way to go about it is to map all your personal and professional commitments to the two options (buying and investing) and arrive at the best opportunity for yourself.

So, what are you waiting for? Choose the option that is best for you and take the plunge! We have helped thousands of business buyers and investors in choosing the right business opportunity through our platform. We help you get matched to the right businesses, communicate confidentially with business owners, and much more. Register with us today to kickstart your journey, or write to us at [email protected] to know more about what we do and how we can help you.

Due Diligence Before Buying a Business: What, When, Why and How

We often come across the term ‘due diligence’ in the context of buying, selling or investing in a business. Simply put, it is the investigation or in-depth analysis of a business in order to ascertain its true worth. We can compare it to the process of buying a property (e.g. a house) for ourselves. Before we buy a house, we check the location, try to determine whether the house is in good condition, check if there is any legal issue involved which may land us in trouble, and so on. Similarly, before you buy a business, conducting due diligence on that business is a must.

Now, let us try to understand due diligence better by considering the various important aspects of it.

What Are the Different Types of Due Diligence?

Business: Begin by evaluating the type and size of business and its nature of ownership. Evaluate the position of the business and its products and services with respect to the market, the profile of the seller, relationships with suppliers and other channel members, quality of the existing staff, status of existing leases (if any), and so on.

Financial: It is best to seek assistance of your accountant to evaluate the financial health of the business. Request audited financial statements of the business for at least the last three years and provisional financial statements for the ongoing year, if applicable. Assess the profitability, net worth, cost structure, debt equity allocation, asset utilization, current ratio and any major outstanding liabilities. Also, request financial projections for the next 3 5 years and ascertain the future potential of the business in an objective manner.

Technical: What are the core technology elements in the business? What is the efficiency of technology used in the business? Is it state-of-the-art and cost effective? Can it be easily extended to match with future technology? Are the licenses and patents in place for any technological innovation carried out by the business? Is there adequate infrastructure to support the current and future technology?

Legal: Look for any legal matters of concern, such as if the business has been served any legal notices and the present status of such notices, status of tax compliance of the business, any disputes on ownership of the business, any ongoing or past litigations, safety aspects of plant and factory, if any, and so on. You can further deepen your analysis specific to a particular business and get professional opinion from your legal advisor.

When Should You Conduct Due Diligence?

As a prospective buyer of business, you will come across a number of attractive business opportunities. The best time to conduct due diligence is after you have shortlisted your prospects to a maximum of 2 businesses, which match your criteria to the maximum possible extent. Once you are certain that the business seller is genuine and has a clear reason for selling the business, that there are no obvious red flags in the business as per your initial analysis, and that you are satisfied with the overall initial assessment of the business and its reputation, it is the perfect time to take the deal forward and conduct due diligence to investigate the business in depth.

Why Should You Conduct Due Diligence?

Due diligence on a prospective business is a must for buyers because –

  1. It helps them find out any issues or concerns with the business that can affect their purchase decision
  2. It helps them gather the inputs required to carry out an objective valuation of the business
  3. It is critical to manage future transition in a better and smoother way

How Should You Conduct Due Diligence?

The best way to conduct due diligence is to first have in place a cross-functional team consisting of an accountant, a lawyer, a tax advisor and a business analyst. Create a checklist of documents to be requested from the business owner and keep on tracking the receipt of such documents on a regular basis. As your team proceeds with the due diligence process, request them to keep a list of all the questions for which they need clarification, and share these with the seller periodically. Don’t leave anything for the last minute, keep addressing issues in a timely manner.

So, are you ready to buy a business soon? We have helped thousands of buyers and sellers discover their right match through our platform and have helped many of them close their deals successfully as well! To know more about what we do and how we can help you, please write to us at [email protected].

How to Identify a Potential Buyer and Go About the Deal-Making Process

As a small business owner, it can be challenging and confusing to understand how to sell your business, especially if this is your first time. Over the last few years, we have supported thousands of business owners in the journey of selling their business, and have found that one of the most common questions that business sellers have is this – how to identify potential buyers for their businesses?

In this article, we bring to you the key insights we have gained through our platform on the essential aspects to be kept in mind when identifying a potential buyer for your business, and how to go about the overall deal-making process.

Identifying Your Target Buyers – Streamline Your Efforts

When it comes to buyers, we have seen many sellers waste their efforts by reaching out to the wrong target audience. It is advisable to start your buyer-identification process by profiling the ideal buyers from your business. For example, are you looking for individual buyers, institutional buyers or both? Are you only looking for buyers within your industry or are there related / complementary industries you are willing to explore? Are you looking for buyers in a certain location? This will help you streamline your outreach campaigns (online and / or offline) and reach out to the maximum possible buyers in the shortest possible time.

Being Discoverable – Critical to Reaching Your Target Buyers

Sellers often spend time and money putting advertisements anywhere and everywhere. Focus on the being discoverable – identify options that give the maximum visibility for your sale proposition, but make sure your confidentiality is not compromised. Dedicated technology platforms like IndiaBizForSale are excellent for making your sale proposition searchable and discoverable by potential buyers. No matter where you advertise, make sure you create an attractive business brief to catch the buyers’ attention.

Handling Buyer Inquiries and Qualifying Prospective Buyers – Do’s and Don’ts

The real process of identifying a potential buyer for your business actually begins when you start receiving inquiries (interests) from buyers. Try to ascertain how serious the buyer is – Does he respond to your communication on a timely basis? Does he ask the relevant questions about you and your business? Is he ready to sign a Non-Disclosure Agreement (NDA) before you share any critical or sensitive information with him? Does he understand the deal-making process? Classify buyers by their genuineness and credibility and share detailed information only with the buyers who are qualified according to the assessment criteria set by you.

Handling Due Diligence and Getting Your Business Valuation Right

Once you and your buyer have established trust between yourselves, it is important to understand the process of Due Diligence. The buyer will usually have a team of professionals who will investigate your business extensively. It is important that you prepare for this stage right from the day when you decide to sell your business. Make sure your books of accounts, business incorporation documents, title and ownership documents, process documents and policy documents are all in place. Having said that, Due Diligence is so much more than just documents – a seasoned buyer is likely to analyse your business’s reputation, position in the market, customer satisfaction, and technology aspects, as applicable. For valuing your business, it is always advisable to take help from an experienced, expert valuer with credible track record. This will help in negotiating with the buyer and also give you a realistic expectation about the asking price of your business.

Negotiations and Deal Structuring – Get the Best from the Deal

At this stage, it is important to have a seasoned deal negotiator on board who can negotiate on aspects such as transaction modes (cash vs non-cash), payment timelines, title transfer timeline, distribution of part-payments (if any), and your post-sale involvement in the business. Apart from this, you will also need to discuss legal and compliance implications, such as tax liabilities, licenses, and so on.

Closing the Deal and Managing Transition

The final leg of the deal-making process is closing the deal – i.e. receive your due payment from the buyer and give the ownership of your business to the buyer through transfer of title. While it is usually a simple process, sometimes there are minor hiccups along the way to watch out for. For example, we have seen a few deals where last-minute conflicts have arisen due to the buyer / seller not fulfilling certain pre-defined terms and conditions. We usually mediate in such situations on request, and help the buyer and the seller reach a consensus through discussion.

Selling your business doesn’t necessarily need to be an overwhelming experience. With our wide network of thousands of buyers, experience, and expertise, you will be in a better position to pursue a deal successfully. To know more about what we do and how we can help you, visit IndiaBizforSale.com.

Want to Buy a Business in India? Look no Further

If you have been typing ‘I want to buy a business in India’ in the search box of online search engines for a while now – you are not alone. However, legitimate information, let alone practical information, on buying a business in India are not easily found. Dedicated platforms are even rarer. We at IndiaBizforSale.com are exactly that – a dedicated online platform for buying and selling of businesses in India – and much more! Add to it the fact that over the last 4 years, we have closed over 19 business buying and selling transactions. This leaves us in a favourable position to address your doubts and queries about buying a business in India. Continue reading “Want to Buy a Business in India? Look no Further”

Buying and Selling Business: Connections Made Easier

Newsletter Issue 41
September 2016
 
Still looking for the right buyer / investor?
Finding the right buyer for your business and getting connected with him can be a painstaking and tiring task, especially when you are trying to sell your business while keeping it confidential.

Now we are offering you a quick and easy way to connect with our registered and curated buyers.

Quicker Communication with Business Buyers

Newsletter Issue 36
April 2016

Buyer information will be available to sellers (albeit with privacy settings)

We believe that privacy and confidentiality are very vital for successful deal closure especially for running businesses. As a reason, since the inception of IndiaBizForSale.com, we have never shared any identity details/ business confidential information with any users or third party.

In the recent past, many of our buy-side users shared that they would not mind sharing their details with the sell side. With this feedback, we are changing our policy, we will allow the BUY side (registered members of indiabizforsale.com) to share their details when they contact the SELL side listings. Obviously, there will be an option available for the buy side if they require their details to be kept confidential.

Continue reading “Quicker Communication with Business Buyers”

Connecting Businesses with Opportunities

Newsletter Issue 34

February 2016

BizNews: Your Monthly Refresher for Buying and Selling of Business in India

Connecting Businesses with Opportunities
The idea of looking to buy a business starts by finding and connecting with the right opportunity at the right time. Most aspiring investors put a lot of effort into choosing the right business they are looking to acquire. In our experience, it stands true that an organised approach will help you find the right business.

Let us help you in connecting with the right Business Opportunities for Investment in India.

Continue reading “Connecting Businesses with Opportunities”

Are You Really Ready to Buy a Business?

Buying an existing business is becoming a practical choice for seasoned professionals who prefer not to start from scratch. These professionals generally would have worked at various positions in medium to large organizations for most of their working professional life and now they are looking to start something of their own.

These professionals understand the time and resources it takes to build a business from scratch, instead they prefer spending time and resources to further build the business they have acquired. Generally, these middle-aged professionals (mostly) who have years of experiences and the skills they have garnered, either have some sizeable funds of their own and/or have access to funds via their network to finance the purchase of an existing business.

Continue reading “Are You Really Ready to Buy a Business?”