Buying an already profitable and successful business is a lot less risky than starting from scratch. And that is even more so the case if you want to start a business overseas.
There are still risks of course, the main one being that the business is properly valued in line with a good understanding of local trading conditions and trends. So it is vital that you do your research and undertake due diligence.
There is a lot to take into account, including regulations, tax, employment issues and so on. Taking on specialist advice should save time and money. For those moving their business to the UK a corporate immigration service like iasservices.org.uk can help. If you’re starting or expanding your business overseas make sure that you engage a business broker, accountant or lawyer in that area who can help you to navigate the local business environment and get the best deal.
Wherever you plan to re-locate, here are a few questions you should ask yourself and some research you must conduct.
Will You Do Justice To The Business?
With any new business (overseas or domestic), there are certain aspects you should be mindful of. The most critical element is whether you are suited to take over the business. You should consider making a purchase only if you have the experience and skills to take over successfully. Just buying a business for its sake and then running it to the ground with inexperience is doing the company and its employees a severe injustice.
You should have the skills to critically analyse the business and ensure that you can improve it from the current revenue, market, and brand standing. You should also have the foresight to overhaul the entire company without changing each little thing. If you need to change everything, you might as well invest in starting your own small business instead of purchasing an existing one.
It would help if you were also experienced enough to manage the old staff, attitudes, and loyalty to the previous owner. Changing the entire team can be costly to the bottom line. You may also lose out on potentially skilled people who are extremely good at their jobs.
Do You Have The Funding?
The easiest way to buy a business is to purchase it outright. However, there are several things you should consider before even thinking of making an offer. Acquisition costs can be pretty high for overseas businesses (considering the exchange rates). You would also need to buy out the previous owner and pump enough funds into the company to turn it around or continue with the initial funding till it starts making a profit again.
You would also have to factor in the cost of expansions, rebranding, marketing expense, employee attrition, and the change of ownership, licensing and paperwork. Registrations and transfer of licenses will also be another cost to incur.
Unless you have done business in an overseas country earlier and know precisely how the acquisition works, you would need the help of local experts. It would help if you also accounted for the additional expense of having accountants, lawyers, and tax consultants on retainers.
What Additional Preparation Do You Need?
- Getting the Finance: Since the pandemic has been difficult for lending institutions, you may need to look at local funding in the overseas country. If you already have the money for the overseas business purchase, you could borrow against those funds and include the purchase cost in the books. However, when managing funds in a foreign country, you would need trusted financial advisors. You may also have to provide security when taking a loan for business expansion or acquisition.
- Research the Business: Whenever you think of purchasing an overseas business, start your research early. While you approach the owner and start the negotiations, you should continue looking into the company’s past financials. Any bad debts, outstanding loans with multiple banks, overdrafts against loans, establishment size, customer base, potential customer acquisition costs, previous reviews and market standing, and more should be thoroughly checked before going forward with the purchase. While conducting research, it is a good idea to find out what has led the owner to sell the business? Finding out the reasons for the sale can also help you get a better understanding of the workings.
- Competition: When considering a business purchase, you should always do a background check on the business, its competition, and any other long-standing rivals. Doing a review on the competition’s success and what they’re doing differently are a few of the things that should be a priority. You could also outsource the research and analysis to a third party for an unbiased view and recommendation.