Taking Over Established Business
Are you thinking of taking over an established business rather than starting your own? Here are some very important points to take into consideration before you do. Brilliant contributed post.
5 Things To Consider When Taking Over A Business
For those with the confidence and motivation to lead a company, taking over an existing business can often be much easier than starting a company from scratch.
Buying an existing company will cost more upfront than starting your own company, however, the upside is that you’ll be taking on a business that already has a reputation and a steady stream of clients.
To make your venture a success, it’s worth considering these factors when shopping for businesses to take over. These will ensure that you’re taking on a profitable investment and not a sinking ship.
1. You’ll need a thorough understanding of all ingoing and outgoing costs
The company may have ongoing contracts with clients, as well as regular outgoing payments to others. You will need to have a clear understanding of all these costs.
There may also be the issue of debts – others may owe the company money and the company may owe money to others. Negotiate how these debts will all be paid. Will you take on any company debts, or will the seller take them on? Hiring an accountant or financial advisor could be useful for helping you to make the best decision.
2. If you’re taking over a premises, it may be on lease
If you’re taking over an office or shop or another property that is on lease, look into how much the rent is and whether the landlord would be willing to take you on as the new lessee.
Some freeholders may up the rent when a new lessee takes over. The leasehold may also be for a limited time – check that this can be renewed afterwards and isn’t too soon.
3. You’ll likely have to take on all the employees
Along with the company, you’ll possibly be taking on employees.
It’s possible that they may be protected in a contract under TUPE regulations, preventing you from dismissing them or lowering their wages upon taking them on. Take some time understanding TUPE and what it could entail.
It’s worth also arranging a meeting and talking to all your new employees or contacting them each individually to get to know them personally – this will ease the transition and ensure that they respect your new authority.
4. It could be worth getting an indemnity from the seller
An indemnity bond is worth having for insurance purposes in case costs spring up at a later date that were the result of the previous employer’s actions.
This could be tax that’s owed by the previous employer or a disagreement with a past client or a lawsuit from a previous employee. Signing such a bond ensures that the previous employer pays for any of these costs.
5. You may need the previous employer to stick around for a while
It’s worth having a transition period in which you can slowly take over the business in stages.
The previous employer can then introduce you to clients and employers and allow you to take over old projects whilst completing new ones.
Make sure that the previous employer is able to do this and doesn’t simply want to run away and leave you in the lurch.
Had you thought of all these considerations? I certainly hadn’t. Would love to hear your personal business story in the comments below.