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).

The First-Time Buyer’s Tips for Putting Money in a Small Business

You may have just decided to buy small business for the first time, or maybe you are still toying with the idea of doing so. In either case, you would probably want to know what you should watch out for while buying a small business in India. In this article, we will discuss a few important considerations to be kept in mind while you are on the journey of acquiring a small business.


1. Don’t Be ‘Sold’ While Buying


As a first-time buyer, it is possible that you will be overwhelmed by the businesses that are presented to you, and that you will take the seller’s words at face-value. It is important not to get ‘sold’ on a business or idea while buying, and to keep your professional judgment as objective as possible. Do intensive research and due diligence before you commit to anything. Have a team of professionals evaluate every business thoroughly, instead of giving in to the words of any friend, colleague or family member.

 


2. Taxation Consequences


There are several tax implications associated with buying a small business in India. These include capital gains tax, previous year’s tax liabilities of the business, tax provisioning of the business for the forthcoming years, tax credit / refund, changes in taxable income of the buyer, and so on. Ignoring tax implications can land you in trouble even long after the transaction is closed. It is wise to have a Chartered Accountant or a Taxation Expert review the tax implications of your deal and advise you on the same.


3. Don’t Invest Money That You Can’t Afford to Lose


Remember that investment in a business is a risky, long-term affair. It doesn’t come with the privilege of certainty unlike other options such as bank deposits – which is a fair game, as the returns of investing in a small business are much higher too! But the thing to keep in mind here is that you should not invest money which might be required by you or your family in the near future. Invest earnings that you can afford to have locked up for years, or may be even lose, in the worst-case scenario. The bottom-line is that your professional decision to invest in a business should not affect your personal life.


4. Know Your Rights


Are you exercising all the rights of a buyer? For example, as a buyer you have absolutely no responsibility to take on the liabilities of the business you are buying or that of the seller. You also have the right to restructure the business as you may deem fit post purchase. There are several other significant rights such as right to full disclosure of business information by the seller, right to seek legal help in case of any misrepresentation, and so on. Make sure you know your rights as a buyer and exercise them when needed!

 


5. Get Professional Help


Last but not the least, it’s better not to take it all on yourself the first time. Don’t have a way with words? Get a negotiator on board. Find it difficult to crunch numbers? Get your CA to do it for you. Unable to source good businesses? Get a consultant for deal sourcing. Feeling lost about the legal implications? Get advice from a lawyer. The idea is that your first-time buying experience should be as smooth as it gets, and you should definitely not end up losing money or sleep!

If you are looking for a one-stop solution for professional management of your deal, you can visit us at IndiaBizforSale.com and explore our services and success stories. To know more about what we do and how we can help you, please contact us on [email protected].

How to Grow Your Small Business with Franchising

Why Franchising?

As the owner of a small business, you are probably looking for growth options that let your business expand on minimum investment. Did you know? Many renowned franchises across the world started off just like your business – small, nimble and with a desire to scale. The popular Domino’s Pizza, one of the greatest franchise businesses in India and globally, had started as a single, small pizza store called DomiNick’s. Leading pre-school education franchise in India, EuroKids, started with just 2 pre-schools and has now grown to over 900 preschools across 350 cities in 3 countries!

Small businesses have always experimented with innovative ways to grow, and Franchising holds a special place in that list. But, what exactly is Franchising? Simply put, it is an arrangement in which a business (the franchisor) offers a party (the franchisee) the right to use its technology, trademark, brand, etc. to replicate its business model in untapped markets and geographies.

 

Benefits of Franchising

For the franchisor (for example, a small business like yours), the benefits are:

  • Penetration into new markets at minimum investment
  • Leverage the talent and local network of new entrepreneurs
  • Quick growth with significant brand building

For the franchisee (the entrepreneur / business you franchise your business to), the benefits are:

  • Ease of venturing into a new business
  • Tested business model, brand value
  • Handholding, mentoring and technology support

How to Go About Franchising Your Business

 

  1. Preparation – As they say, “preparation is the hallmark of a professional”. Your future franchisee will require detailed guidelines on how to go about replicating your business model and brand recall. Many small businesses do not spend much time documenting their know-how, internal processes and systems – franchising is a good opportunity to do so. Develop clear guidelines, Standard Operating Procedures (SOPs) and document your key learnings in a systematic manner. Design concise training modules for the franchisee entrepreneur and his staff, and also a timeline and budget for the training. Take stock of your paper-work and consult a legal advisor to make sure compliances are in place for a franchise arrangement to function.
  1. Invest in Your Brand – If you haven’t taken your brand equity seriously yet, now is the time! The first step is to build and protect your brand. Make sure you have a clearly legible logo of the right colours, get your trademark registration, and reshuffle your marketing strategy around creating maximum brand recall. Remember that brand is one of the most critical elements in ensuring success of a franchise business. Work on creating a good online as well as physical presence, and make sure you stand out!
  1. Choose the Right Location – Franchising is largely about entering new geographies. As a small business, make sure you ask the right questions before expanding into a new location. Is the market big enough? Will it generate enough sales to cover the cost of setting up and running the franchise? Is it accessible to you for physical inspection and visits, if need be? Is your brand known to your target customers in that area? Will you find the right franchisees there? Are there any politico-legal challenges in operating there?
  1. Choose the Right Franchisee – Once you have chosen a location, choosing a franchisee can be a challenge as the new location will not be too familiar to you. To source good franchisees, list your business as a franchisor in dedicated web portals for small business growth, such as IndiaBizForSale.com. You can also reach out to your personal network in the chosen location and post in entrepreneur forums. Once you have a pool, shortlist on the basis of criteria such as professional qualification, local influence, familiarity with the industry you are in, entrepreneurial acumen and so on. The first few franchisees will mostly be selected through trial and error. Thereafter, you can use the learnings to standardize the process to a great extent.
  1. Provide Continuous Support to Your Franchisees – Remember that Franchising, above all, is a business relationship and not just an arrangement. It is important for your franchisees to feel that they are your partners in growth and that you have their back when they need it the most. Also, create a system of continuous tracking, reporting and discussions so that you are always informed about how each franchisee is doing in the market and what support they need to grow and earn profits.

Now that you know how to grow your small business with franchising, get started today! To know more about how IndiaBizForSale.com can help you achieve your business franchising goals and much more, click here.