There are quite a few advantages to purchasing a business that currently exists over owning a business that you have to start from “square one”. Here are a few things to carefully consider when trying to decide whether to purchase a business or a start-up enterprise.

FINANCING. A purchase business proposal is looked upon more favorably by banks than a start-up because of existing business valuation data. As such, you’re far more likely to acquire financing if you’re looking to own a business.

TRACK RECORD. A business for sale is established. With a purchase business, you have historical data on past performance, the market, competition and its future growth potential. You can buy business as is and incorporate your ideas. Since you already know the value a business holds, you can improve upon its weaknesses and enhance its strengths.

SOLID ASSETS. When you value a business, assets are a key component. With purchasing a business, you’re obtaining essential assets that allow you to continue to do business as usual. As a buy business turnkey operation, you don’t lose time or money setting up a business. When purchasing a business, inventory is readily available and the business currently has the necessary employees and regular customers.

APPEAL. With a business for sale, you can choose one that appeals to your interests. Even if you purchase a business that’s already up-and-running, it can still be considered as a start-up operation if you’re intending to restructure it according to your own vision.

OPTIONS. Buy business options range from small family-run operations to large companies. You can also purchase business franchises. Regardless of which buy business route you choose, performing a thorough business valuation is absolutely essential. When you properly value a business, you can be quite confident that the total price you’re paying out to own a business is reasonable.

VALUE. A business for sale brings a wealth of value. The buy business portfolio includes everything you need to continue on seamlessly with the business. The business valuation is an important step to ensuring you are getting a profitable enterprise. When you value a business, other factors beyond it being financially sound need to be taken into consideration, including tangibles and intangibles included in the sale. When you buy a business, you also need to decide if it’s a stock or asset purchase. All of these issues should be covered in the business valuation phase.

Unlike a start-up, when you buy a business, you are free from dealing with finding the best location, the costs of equipment and supplies, setting up vendors or suppliers, acquiring licenses and permits, hiring employees, establishing brand recognition, identifying industry competition, and the costs of marketing and promotions. But if you’ve always wanted to start a business yourself and experience all the nuances that go along with it, then buying a business might not be for you. If you prefer not to inherit someone else’s creation and own a business that you create yourself, then a start-up probably best fits your entrepreneurial personality. However, if you’ve always wanted to run a business, then a business for sale is your best option.

Richard Parker is the President and founder of the Diomo Corporation – The Business Buyer Resource Center. His inspiring materials, seminars and consulting have assisted thousands of business buyers with achieving their life long dream of buying a business.

A common perception of the requirement ‘continual improvement’ contained within the ISO 9001 Standard (8.5.1) is that in some way it relates to an improvement of product or service. Some more serious thought might reveal this to be a misinterpretation, as the document is not a product or service specification, but a system for controlling the quality of the product or service through the output. Title – - ISO9001:2000 Quality management systems – Requirements’. So, in so far as the Standard relates to the organisations’ output, it defines a control and assurance system that should provide a measure of conformance for the outgoing product. The improvement requirement refers to the manner in which this control is affected.

Herein lies the real problem with the ISO9000 series, as it has little to do with management in the normally accepted definition of that word, and certainly nothing to do with business management, which is about efficiency, effectiveness and costs. Coerced into an ISO9000 program by (in the UK) a government sponsored initiative which planned to boost the nation’s international image for quality, organisations of all sizes accepted the standard and registration in the belief that this by itself would improve their overall status in their individual markets. At the beginning this was true, but when competitors were similarly equipped with their registered status certificate, and none of them demonstrably better than the other, buyers returned to their original practice of buying against criteria that did not include ISO9000 registration. Clearly the Continuing Improvement aspect of the document was either a myth, wasn’t being implemented, or didn’t relate to what the customer wanted.

It seems obvious that if a product or service has achieved an acceptable standard of ‘quality’ (whatever that might mean to the purchaser), any further improvement that is to be seen by the purchaser will be in the areas of cost and availability. These are not features that concern the ISO 9000 standards; however, they do impact on the customer’s perception of that product or service. Logically, they also impact on the task of Sales and Marketing people who have the responsibility of persuading potential customers of the uniqueness and superiority of their product. Here we find the Standard at its weakest and Continuing Improvement a sham.

If an organisation were to “take on board” a more dynamic approach to the management of the business, to the management of Quality if you like, and that approach specifically dealt with the cost of producing and distributing the organisations products or services, THAT would actually result in real improvement, and most likely continual improvement.

Why would this be different to the laboriously developed ISO9000 management system? For the simple reason that every top management team understands one language – money. A rationally constituted cost measurement scheme would include ‘error free’ cost estimates, plus actual measurement of costs incurred due to a failure to achieve the error free working. We call this the cost of non-conformance, or perhaps more acceptably ‘Transaction Costs’. If executive managers could be persuaded to abandon ISO9000 theory in favour of the collection of honest cost data such as this, business would – overnight, become more profitable because of the actions they would take – or have taken for them – to rectify the clear overspend found by this approach.

Generally this will not happen. Not due to any difficulty or inability to collect this data, but an inbuilt belief by virtually everyone not familiar with Eastern Cultures that error & failure is an inevitable consequence of human endeavour.

In the meantime, managers and their acolytes continue to hang onto the support strap ISO9000, firm in the belief that a documented system and its certificate will – as with the Wizard of Oz – be an adequate substitute for objective thought.

Ed. Bones is an IRCA registered Lead Auditor, a chartered quality professional, and a senior partner with The Meon Consulting Group, delivering expert audit and consultant services for ISO9001 & ISO14001 management systems. The company web site provides detailed information on various topics, and includes the generous offer of FREE Advice.

Despite an economic downturn, poor sales, sky-rocketing unemployment and a banking emergency, this actually may be a great time to think about purchasing a business. The reason is quite simple: it’s a buyer’s market, which means the environment is ideal to own a business.

Buy business trends are on the upswing, with sellers relaxing their purchase business terms because there are fewer qualified buyers, third-party financing becoming near impossible, and opportunities to negotiate a really good deal for a business for sale aplenty.

However, the welcoming climate for buying a business doesn’t mean you should proceed without having certain buy business fundamentals in place. It’s very easy for enthusiastic, yet inexperienced buyers, to pay too much for a business for sale that has no chance for survival, even in good times.

Most importantly, it’s essential to understand the buy business environment before even thinking about whether to own a business. At the moment, the buying a business market is being significantly damaged by the present economy and there is very little small business lending happening. Consumer confidence that the economy will turn around anytime soon is very low and many businesses are seeing multi-month declines. For these reasons, it’s crucial when pursuing a business for sale to negotiate a good deal that will assure your protection both now and in the future if the economy doesn’t improve relatively soon.

Before deciding whether to own a business during these tumultuous times, there are six basic buy business steps to follow. By following smart purchase business philosophies, you will position your new business to succeed regardless of the economic climate.

Here is a look at the six important steps to buying a business:

1. Request Several Previous 12-Month Profit & Loss Statements. Normally, a seller would provide year-end financial statements, any interim statements and tax returns for buy business inquiries. But considering the present economic environment, you’re going to need to review the business for sale financials from the present date and back to the past 12 months, as well as financials from the previous 12 months and the 12-month term before that too. This will give you a better picture of the overall health of the business for sale.

2. Be On The Lookout For Hidden Expense Cuts. With a business for sale, many sellers try to make the company look better by making cuts to enhance profits. When looking over the financials, review the expenses for marketing, advertising and payroll by performing an item-by-item comparison over quite a few periods and comparing the number to sales or income. Furthermore, a review of the balance sheet will show whether inventory has been cut or if shareholders or owners contributed their own money to improve the company’s bottom line.

3. Review The Customer Base. When purchasing a business, understanding the existing customer base is essential. Although a business may be performing well, sales might show problems. If you chose to own a business where sales are dwindling, be sure to adjust the purchase price accordingly and have a new sales and marketing strategy in place.

4. Negotiate Earnouts. These are purchase business terms based on performance. Linked to the purchase price, earnouts are assurances that the business for sale can survive in the current economic climate and grow in the near future. Once you’ve done an in-depth analysis of the books, establish an asking price that reflects the current performance of the business and its stability for future declines. It’s essential to negotiate a performance-based deal, especially if the buy business evaluation shows a loss or no recent stability or growth. With an earnout structure, the seller receives the balance of the purchase price when certain targets are met in the future. Earnouts can be based on profitability, sales, or retention of customers.

5. Insist on Seller Financing. As far as lenders are concerned, this is not a buy business climate. So chances of you receiving financing for buying a business are slim, especially if you have little collateral or no business ownership experience. As such, it’s important that the seller finance the entire purchase business price or a large portion of it.

6. Don’t Be Intimidated By Business Brokers. They represent the seller, so it’s their job to present a positive buy business environment. As such, you need to take control of the deal.

When purchasing a business, it’s crucial that you acquire all the key financial and performance data which has anything to do with the business for sale. This information is your bargaining tool when meeting with the seller. You can own a business and be successful at it if you make well informed purchase business deals with the seller to limit your risk. Despite the current business climate, it’s exciting to own a business and nothing should stand in your way of realizing your dream.

Richard Parker is the President and founder of the Diomo Corporation – The Business Buyer Resource Center. His inspiring materials, seminars and consulting have assisted thousands of business buyers with achieving their life long dream of buying a business.

There are an amazing array of different factors involved when purchasing a business. This is particularly accurate when you’re pursuing negotiations to own a business in the retail environment. You should always ensure that you don’t leave anything unturned so you can provide yourself with the very best possible shot at achieving your dreams in this highly competitive business arena.

So, where should you begin? You need to understand what to look for and have a good grasp of the challenges you will face in order to bring any retail business up to its best performance levels. It’s also absolutely essential to develop a clear understanding of why some businesses are a resounding success, while others are a complete failure.

Profitable businesses have many things in common – essential components, if you will – and one of the very first tasks you should address is to find out whether the entity you’re looking into has these components, or if it can be adjusted accordingly.

When you own a business by yourself, you’ll require quite a bit of professional advice and assistance, and this also applies when you’re involved in negotiations to purchase a business too. Look for professionals who have experience in your particular niche and sector of the retail business environment. When it comes to brokers and intermediaries, make sure that you understand that the business broker formally represents the seller and has a role to play – you should bear in mind their allegiance. Always maintain a good relationship with the seller, as he or she will be vital in the post contract stage and you should therefore maintain a professional relationship with the broker during the negotiation stage.

When you’re actively going through a list of businesses for sale, ensure that you’ve categorized the essential criteria. There are maybe as many as 70 key areas that you need to cover and when you scour the listings make sure that you look for all of these elements, good or bad. Extra care at this stage will whittle your list down to a manageable number.

When you’ve reached the main discussion phase, bring a comprehensive list of essential questions to ask the seller. You have to really focus and search for important indicators. Often, you can get a great insight into their background by couching your questions in a particular way. You should make sure that you pass this stage with a clear understanding of the business.

Financials are often very difficult to understand, especially for a layman. This is where your independent accountants and advisers come in and help you to understand the numbers. There are a variety of things to look for and quite a few pitfalls to stay clear of, at this phase. Learn how to analyze the figures and then develop your own conclusions based upon this information.

Whilst it is important to know how to value a business and you should use proven and tested formulae, you should make sure that you bring in your advisers at every stage to help you understand this process. You certainly do not want to over pay when you purchase business assets and goodwill. Sometimes it is almost impossible to use a strict formula to value a business, which may or may not rely on a lot of supposed “goodwill”, and it may be necessary to construct an earnout formula to help you. If you do decide to buy a retail business based on your findings to this point, you will also need to make sure that you have covered all the financing elements and it is important to try and get the seller involved at this stage. This will inevitably focus the attention of the seller, as he or she will be involved with you for the forseeable future and it is in their best interests to make sure that they are also structuring a great deal.

When you come to the formalities of closing a deal, there are of course numerous legal and documentary issues to address. As you look forward, make sure that you have a very clear plan to help you through the transition, and on into the future. This is a whole new topic in itself, but you do need to make sure that the smooth running of the business suffers the least disruption, and that you do not “spook” the customers!

Richard Parker is the author of the How to Buy a Good Business at a Great Price series. As President and founder of Diomo Corporation – The Business Buyer Resource Center, his materials, seminars and consulting have helped thousands of business buyers realize their dream of buying a business.