It takes years to build a loyal following of customers for your business. And in the case of a retail business, the process is all the more complex and demands patience and constant innovation. Showrooms, shops, hotels, restaurants, banquet halls or other retail businesses running for a long time clearly indicate that they have cracked the code of “customer satisfaction”. They know the customer, the right pricing, the product, the right vendors, et al. The period of teething trouble is over and trials and errors have resulted in a proper understanding of the customer and markets. This is the reason, sometimes, the best way to start a new retail business is to simply buy one.
Why should you buy an existing retail business?
- It is already established at a particular location and has a loyal customer base.
- The business will have its own equipment, suppliers, and staff that you may want to continue working with.
Undoubtedly, opting to buy an existing business will involve less risk than establishing a new one although the risk factor will sustain as you will be considering the past life of the business and you will have to take it further down the road with your own inputs and potential. You need to evaluate all the aspects and envision its growth in the future.
Where Do You Look for a Business on Sale?
The search for a validated business up for sale is a tedious task and may involve a lot of hours and evaluation. But two of the easiest ways are
- Local Advertisement: If you are keen to buy an established business in your local area or city, then the best way is to search in the advertisements, classifieds or local lawyers or consultants who keep track of people willing to sell and/or buy a business. Here, networking also plays an important role when you let the word out in the market and the most suitable business may come from a known acquaintance as a reference.
- Internet/Online: Internet is a vast place to find the suitable business but the real challenge is to go through the long list and select the hidden gems in them. But there are places which host all interested buyers at one place. Tobuz.com etc., are such places where you not only see owners willing to sell their business, but also advisors ready to help you finalise the deal.
The Next Step: How to Buy an Existing Business
Buying a retail business is an art and science in itself. A step by step guide is given below.
- Evaluate the lucrativeness of the location: As mentioned before, the location plays a great role in getting the right customers to the business. Usually, the business location is on a lease which is transferable and negotiable if you need to extend the deal. You need to consider constructions happening around (if any), the approach road to the store, parking facility and the kind of audience the locality attracts.
- Know why the owner is selling out: Before you move ahead in data gathering, find out why the owner is selling the business. You need to question the seller on the history of the business, why is it on sale and try to know if there is something that is not being disclosed openly. These basic questions are the initial search parameters for you.
- Check the potential of the customer list: There are always loyal customers to a particular business. The key questions to ask include: what is the total worth of such customers, how loyal are they, can we trace a transaction history and whether they are likely to continue, given a change of ownership.
- Appoint an attorney to vet the legal contract: If you have reached a serious point of buying the business, you need to hire a professional to help vet the various contracts that the business has signed off with customers and vendors. You may need to verify certificates, tax returns, balance sheets, property lease, income statements etc.
- Appoint an evaluator to know the worth of the business: Before you invest your hard earned money, it is important to evaluate the worth in monetary returns. You can take the help of business evaluation tool, like the one on Tobuz.com to calculate the potential of a retail business. Apart from this, you can always take the help of business consultants listed on the platform to professionally assess the worth of the business.
- Employee dispensation to continue: The performance of the business is typically influenced by employees and their relations with the customers. But will they be willing to continue under new management? What are their unresolved expectations? Can you meet them? Alternatively, do you want to hire a new kind of staff?
- Future prospects of the retail business: To be honest, the future cannot be determined and the risk factor will always hang around. However, what you can evaluate at the point of buying is foreseeing the future prospects of running the business based on various existing factors that will reflect or give an overview of the results in the coming days.
- Signing the contract: Once, you are determined to buy the business given that you have evaluated the worth, negotiated the price, scrutinised the assets and liabilities and other parameters, the most crucial aspect is when the two parties sign the contract. Experts listed on Tobuz can help you determine how you go about the final step of signing the contract. There are various clauses, guidelines, and hidden loopholes that you may not understand, but won’t miss the eyes of a professional.
Buying a new retail business is tough but not a rocket science. With professional help and the right approach, you can always land a gold mine.