“How to minimize risks when buying a ready-made business and what should you pay attention to?”, — write: epravda.com.ua
Instead of starting their own company “from scratch”, entrepreneurs are increasingly choosing to look for a ready-made business for purchase. Investing in an existing company usually saves time on developing a product or service, finding customers, and setting up operational processes. This is what attracts future entrepreneurs. At the same time, often buying a ready-made business, you can get a well-known brand with a reputation and recognition on the market (but not always positive). In addition, a real company has a better chance of receiving additional financing from banks or grants due to its history of activity. That is, there are enough advantages for buying a ready-made business. How to check a ready-made business before buying? Regardless of the investment amount, before making an investment decision, it is worth analyzing the available offers and weighing the possible risks. So after determining the type of business to buy and the available budget, analyze the available ads in your area, terms of sale and compare prices. Read also: I will buy a business: who and why buy businesses in Ukraine and what they pay attention to Advertising: The cost of a ready-made business varies significantly, depending on the field. It is obvious that ready-made businesses in the field of production or hotel and restaurant complexes will cost the most. For example, as of November, the most expensive lot on the OLX platform is a hotel and restaurant complex near Kyiv for $5.5 million. In Lviv Oblast, for example, an operating sanatorium in Morshyn is being sold for $4.2 million, and a shopping center in Chernivtsi is being sold for $3.5 million. Accounts in social networks are among the cheapest. Primary research of the market and competitors of the industry will allow to assess the growth potential. And further communication with the seller to clarify important details will help to form an understanding of the current state of the business: Advertisement: Financial ー ask the owner for financial statements confirming income, expenses, debts, financial obligations to third parties. Legal ー check for licenses, permits and no court cases. Material ー assess the condition of equipment, inventory and other resources to avoid their overestimation. Financial – ask the owner for financial reports confirming income, expenses, debts, and financial obligations to third parties. Legal ー check for licenses, permits and no court cases. Material ー assess the condition of equipment, inventory and other resources to avoid their overestimation. To minimize risks, contact experts (lawyer, accountant) for a deeper analysis of the documentation. Popular categories of ready-made businesses on the market of Ukraine The segment of cafes, restaurants and coffee shops has the most user reviews on the OLX platform – almost 9,000 in October this year. This is one of the most expensive types of ready-made business that can be purchased, not counting enterprises in the field of light and heavy industry. At the same time, the number of ads for sale here has also increased, which may indicate a certain crisis in this niche. For example, the owners open a cafe and cannot break even for a long time, which forces them to sell the business in order to somehow return the invested investment. The profitability of such institutions is usually low, and is only 3-7% of the turnover. The most affordable businesses for investment are businesses of the small retail segment (stores, kiosks and online stores), which do not require significant initial investments. The number of ads on OLX for the sale of ready-made shops has increased by 55% in the last three years compared to October 2022, while they have a stable demand of about 6,000 views every month. Profitability here depends on the markup and the type of goods you sell. From 3 to 5% profitability is typical for grocery retail in Ukraine. And, for example, jewelry can have a markup of up to 300%. For flowers, the margin is usually 50%-200%. In third place in terms of popularity among investors is “Accounts in social networks” (more than 5,500 views in October of this year). This category usually sells ready-made online businesses on various social networks, from Instagram to TikTok. Telegram accounts have become especially popular in recent years, because the wide popularity of this social network allows you to monetize thematic channels quite well, due to the involvement of advertisers. From experience, advertisers can appear from several thousands of subscribers if your channel has good ERR – subscriber engagement and the ratio of the number of subscribers to reads.. 10 main indicators for analyzing the profitability, efficiency and growth potential of a business: 1. Revenue ). The total amount of money received from the sale of goods or services. It will allow you to understand the success of selling products or services. 2. Net profit (Net Profit). The difference between total income and expenses, including taxes and other liabilities. 3. Gross profit (Gross Profit). The difference between revenue and cost of goods or services sold, which shows the efficiency of production and sales. 4. Operating profit (Operating Profit). Profit received from the company’s core business, excluding taxes and other non-operating expenses. This is an indicator of the efficiency of the company’s main activity. 5. EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization). Earnings before interest, taxes, depreciation and amortization (used to evaluate a company’s operating performance). 6. Current ratio. The ratio of current assets to current liabilities, which demonstrates the company’s ability to cover its short-term obligations. 7. Quick ratio. Ratio of liquid assets (excluding stocks) to current liabilities. 8. Debt-to-Equity Ratio. The ratio of total debt to equity gives an understanding of how financially stable the company is. 9. Return on Equity (ROE). The ratio of net income to equity shows the efficiency of the use of equity capital. 10. Return on Assets (ROA). The ratio of net profit to total assets indicates the efficiency of using the company’s assets. Without providing the buyer with complete information about the company, the risks of signing an unfavorable agreement with a problematic or fictitious business increase. Therefore, these 10 points are mandatory for making a decision. On the market today, business proposals are presented that require different levels of investment — from small to significant investments. However, before buying any business, it is important to carefully evaluate the recommendations provided and conduct a thorough analysis to understand which direction will be promising in the near future. By choosing and investing in a business in Ukraine, you not only create opportunities for your own development, but also contribute to the recovery and growth of the Ukrainian economy. Investing in local projects helps maintain jobs, develop new industries and strengthen the country’s economic stability.
