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Important considerations before pursuing a business purchase

March 13, 2018/in Blog /by gartonandharris

British Columbia residents have different reasons for potentially purchasing a business. A particular company may interest you because it is successful, or it may be available at a low price because it is failing. Will you be able to maintain the success of the first choice, or can you rebuild a failing business? These and more questions will need answers before you commit to a purchase, which can risk your financial stability.

When you are looking for a business that would be a worthwhile proposition to buy in Port Coquitlam and the surrounding geographical areas, be aware that advertisements for many businesses that are for sale are often misleading. Doing due diligence before committing to a commercial investment could prove imperative to your chances for success.

What are your options?

If you are pursuing the purchase of an existing business, you may want to go the more controlled route of a franchise, or you may choose to pursue buying an independent, traditional firm that will allow you the freedom to use your own initiative.

Traditional business

If you choose to purchase an independent business, the following aspects might need consideration:

  • Control: With no control from a parent company, you will be at liberty to establish your own set of rules for the way in which you want to operate the business.
  • No profit sharing: The business profits will be yours to keep, as there will be no need to share it with a franchisor.
  • Responsibility: You will carry the entire burden of success or failure on your own.
  • Opportunities: An independent business could offer you endless opportunities, and the willingness to work hard can bring countless rewards.
  • Risk: It is essential to understand the risk of buying an existing independent business, and to prepare for the consequences if things do not go as planned.

Franchise

Investing in a franchise offers many advantages, but it comes along with some disadvantages as well. The following points might help you to evaluate this option:

  • Existing customer base: Customers are familiar with the brand, and loyalty already exists through trust in the service or the product you will offer.
  • Less control: Owning a franchise is comparable to working for someone else. You will have little say and no control over the business operations because it is a tried and tested model on which you must build your success.
  • Strict rules: Parent companies do not usually allow owner initiative to play a role in the business, and there will most likely be regulations to follow.
  • Revenue sharing: When you own a franchise and build your success on the name of an established entity, you must share the revenue with the parent company by paying over a percentage of your profits every month.
  • Track record: While the disadvantages might seem a bit much, buying a franchise comes with an established record of accomplishment, allowing you to avoid many pitfalls on the road to success. This proven record will also make it easier to line up prospective buyers if you ever decide to sell the business.
  • Established infrastructure: The parent company of the franchise takes care of equipment, uniforms, staff training, corporate marketing and other essentials for the infrastructure of the business. This will leave you free to build on already established success, knowing that the support of other franchisees and the parent company is available.

Where to find support and guidance

Purchasing a business of any type is a significant personal and financial commitment that requires careful consideration. Gaining an understanding of all aspects of any potential purchase agreement can substantially increase your odds of making the right decision and protect you from future financial harm from any oversights in the fine print. For these reasons, the skills of experienced legal counsel can be invaluable to you during this time.

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