How to become an investor

Buying a ready-made business is one of the ways to invest your own funds, but the deal is associated with certain risks, and ready-made business needs to through a thorough check before selling.

 

Buying a Business

Buying a ready-made business is one of the ways to invest your own funds, although, in contrast to project financing and venture capital investment, this investment, at first glance, seems to be less risky, and according to reports you can buy a stable and profitable business, however, deal is also associated with certain risks, and ready-made business needs to go through a thorough check before selling.

Business valuation is a key point for making a purchasing decision. Most investors are ready to evaluate the business they are going to buy relying on subjective factors. These factors often include the price of business, location, the buyer’s subjective opinion about the market price based on businesses he looked through before. The market of ready-made business is dynamic and often contradictory, so unlike the real estate market, it is impossible to formalize the price, for example, the cost per square meter of space.

Operating business is a complex product and its value is affected by far more factors than real property. Only a professional appraiser can estimate the value of a business. All relevant factors important for fair pricing are taken into account when evaluating the business with the use of special techniques. Business valuation before purchasing allows understanding the real value of the acquired asset, comparing it to the price demanded by the seller, and provides evidence-based arguments to the buyer for bargaining.

A thorough inspection of business helps reveal hidden problems, adequately assess business value and ensure the veracity of seller’s statements. Depending on the size of business, comprehensive inspection procedure can be very different in terms of timing and cost. The result of a comprehensive examination may be quite different depending on the condition of business chosen by the buyer for purchase. It is a common practice to conduct a comprehensive examination before selling the business in order to raise the value of business for the buyer. In such cases, conducting business inspection before purchasing is advisable only if the buyer distrusts the organization that carried out such examination.