A good video to watch if you are considering starting or buying a business or if you have a business and you are looking for some inspiration.

The BBC’s TV series Dragons Den has found and inspired many successful business owners and in this first video the focus is on Duncan Bannatyne – Success stories in business.

Have you ever considered buying a business or are you in the process of buying a business? Or perhaps you are considering or have thought about setting up your own business from scratch.

If your answer to any of these questions is yes, then you will probably recognise how difficult and daunting this process might be. This article is therefore directed to help you with that decision process.

So the first question you need to answer is:

Do I set up a new business from scratch or do I buy an existing business?

There are pros and cons for both and you will need to weigh these up when deciding upon which route to embark upon. If for example, you have invented the next best product that does not presently exist on the market, then clearly, if you consider this to be a product that does indeed have a market, then setting up from scratch is the route to take, subject to patenting the idea and then doing some initial market research.

However, if you are not the inventor of the next TV or telephone etc. then you need to weigh up whether it will be easier for you to buy a business or start one in a field that you already know. To help you consider the answer to this question it is important to consider the following advantages and disadvantages:

Advantages and disadvantages of buying an existing business:

Advantages

- Some of the groundwork will already have been done in getting the business up and running.

- It might be easier for you to get finance as the business will have a proven track record.

- A market for the product or service will have already been demonstrated.

- There are established customers, a reliable income, a reputation to capitalise and build on, and a useful network of contacts.

- A business plan and marketing method should already be in place.

- Existing employees should have experience you can draw on.

- Many of the problems will have been discovered and solved already.

Disadvantages

- The present owner may have close relationships with the existing customers and therefore when they sell and leave you need to ask the question, will the customers leave as well? This is one of the important question you must ask, when you do your initial checks on a business for sale.

- You often need to invest a large amount up front, and will also have to budget for professional fees for solicitors, surveyors, accountants etc.

- If the business has been neglected you may need to invest quite a bit more on top of the purchase price to give it the best chance of success.

- You will need to honour or renegotiate any outstanding contracts the previous owner leaves in place.

- You also need to consider why the current owner is selling up. Normally if they are selling for genuine retirement reasons or ill health this is okay, but always check the reasons for the sale of their business!

- Think about the feelings of current staff – it’s possible they may not be happy with a new boss, or the business might have been run badly and staff morale may be low.

Having listed a number of advantages and disadvantages attached to buying an existing business, I would you to consider the following further points:

If you buy an existing business you know for a fact that a market exists for the product or service that it sells…

You might be saying, however, that the new business I had intended to set up from scratch has an existing market because there are other companies already selling the product or service.

That might be true, however, you must recognise that it takes time and money to gain market share and when you start from scratch you are starting from zero. Whereas, if you buy an already established business, you are buying both customers and an income stream so most of the hard work has been done for you. That is not to say however, that the business you are buying is in a shrinking market or in a market that is badly affected by a recession.

So you need to consider the economic cycle you are in when you buy a business, because you might not want to buy a company that sells televisions and other luxuries in the middle of a recession, for example.

When you buy a business most of the hard work has been done for you…

There is no doubt that the hardest part of any business is the early days and getting it set up, getting your first clients and getting your initial cash flow. Setting up from scratch requires you to find premises; employing staff; setting up computer systems; deciding on the marketing; getting to be known in the market place; finding suppliers; getting accounts with suppliers; etc. all of which takes time and can in some cases mean a steep learning curve.

Other areas of setting up a new business that you might require is funding and sorting out banks and finance; accountants and other financial advisers; setting up systems and processes within the business; business insurance; telephone systems; etc. whereas most of these will have already been sorted out by the present owner of the business you are considering to buy (not always correctly mind you!)

When you buy an existing business, most of the hard work has already been done for you and whilst you will probably want to appoint your own accountants and financial advisers, most of the other points will have been addressed by the previous owners. Once you have your feet under the table, as it were, you will very likely want to change the way the business is run, especially on the marketing front, however, it is probably much easier to change an existing set up than to start from scratch, because the existing business will already have clients, but more importantly have cash flow.

This existing client base is something that you can go to work on and to build upon and it is important to recognise the value of a client database. Most businesses forget to market to their existing client base so this will probably be your easiest route to growth, by marketing to the businesses existing clients. It costs much more to gain new customers than to sell to an existing one! Which is point missed by most business owners.

If you are swaying towards buying an existing business then it would be better to look to one where the marketing is being done very well right now. This way you are buying “Potential” in the business and can make “Easy” profits and faster gains, let me explain:

When I mention the word marketing – I mean this in the widest possible sense of the word. So for example, does the business make full use of its existing customer base for other products or services that it sells or could sell? Are the premises of the business presentable and the employees welcoming and well dressed? What forms of advertising is the business using and are these being optimised?

There are many more questions of this type you could ask, which are all linked to the marketing of a business. There are some businesses that trade and survive despite themselves and the way in which they are run. You must have been to buy something from a company in the past and received a shoddy customer service! Did you ask the question; how on earth does this business survive?

The truth is that if this is a business you are considering to buy, they are surviving, they sometimes do and these types of businesses come on the market for sale all of the time. So I commend you to buying this type of business and with a little bit of tweaking here and there you will likely turn a loss or a small profit into a good profit in no time. What’s more you should be able to pick up a company like this for a cheap price because of the low profits and of how it is run. A more profitable business is worth more and will be easier to sell again in the future.

My final consideration in this article is in terms of assets at a discount…

If you were to set up a business from scratch, it is likely that you will need to purchase the assets to run the company, at full retail price! For example, all businesses will have computers, telephone systems, office desks and chairs, together with the specific assets needed to run the type of business you might be looking to set up. However, when you purchase an already existing company you will get the assets thrown in for “FREE” because the business cannot be run without them. Admittedly, some of these assets might need to be replaced, but on the whole they work and will come within the value of the business you are buying.

in-business is proud to present its new business to business forum launch today.

This new business forum is for business owners and for would-be entrepreneurs about to venture into the business world! The forum has the following categories to post, discuss and comment:

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 - Start out in business – Buying a business, starting from scratch and business franchises. Click here

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Vendor finance is where someone selling a business is happy to effectively lend the purchaser money to buy it.

If you have not heard of this before, then you may well be thinking, why would I lend someone money to buy my business? This is a good question and is worth explaining.

Let’s say for example you are selling a business for £180,000 and you have a purchaser that is willing to pay you this £180,000. However, it might just be, and especially with the present credit crunch situation, that the buyer is unable to raise the finance through the banks. This could be for a number of reasons, one of which is that there is no security for the loan, either on the business itself or the purchaser has nothing to secure it against. In most cases, people tend to use their house as collateral to raise money, however, with recent events loans are harder to come by and house prices have fallen. Therefore, a loan that might have been easier to get say 12 months ago, might not be available or the amount available might be less.

In the case where you, as a seller of a business, are lucky enough to have found a purchaser would be silly to turn someone away simply because they are not able to raise all the funds by normal means. You could therefore, for example, ask for say £60,000 up-front with two further instalments due in 12 and 24 months time. Of course you could have any other combination of payment options and could even ask for it on a monthly basis.

You could also go for charging interest on the loan and I would urge you to take some form of security for the payment of the money lent, which might include their home and/or the business itself. So if in the event the purchaser does not pay you will get something back for your troubles. Getting the business back might not be what you had hoped for, but the purchaser, in this example, will have already paid you £60,000 up-front so if you can on-sell the business again, you will have cleared an extra profit at the expense of the “failed purchase”.

Benefits of “Vendor Finance”

One quite obvious benefit is simply you will be able to sell your business sooner rather than later, rather than leaving it until you find someone with the cash or with the necessary security to get bank finance.

The other not so obvious benefit is that you will be showing your would-be purchasers a level of confidence in your business, over and above someone who is not, if you are happy to accept finance secured on it. You may also find that this is an “Industry Norm” to take payment by instalments, for example the accounting industry it is normal to buy and sell accounting practices over 2-3 year period.

Disadvantages of providing “Vendor finance”

There are of course disadvantages of you letting someone pay over time, not least the person that buys your business may go out of business and you end up with no money, or just with the initial deposit paid at the outset.

The other disadvantage is that you will not receive all you money straight away, but if you charge interest, and you may well be able to charge a higher rate than you would normally get from the banks or building societies, you will earn something on your investment too.

The other disadvantage is that, should things go wrong then you may end up with the business back and it might be in a bad way, after having been run by the new purchaser for however long. There other thing is the business might go broke and, unless you have taken other security over the purchaser’s house or some other asset, you will have lost your money.

I would certainly advise you to make sure you do receive a substantial payment up-front of probably no less than a third of the selling price, thereby qualifying your purchaser. You don’t want to sell your business to someone and then a few months down the track, they have messed things up and you have no money up-front.

I would also advise you to do some form of credit referencing on the purchaser to make sure that the have no bad credit history, thereby making the whole transaction a higher risk.

Finally, if you are reading this article as a business purchaser, then I would suggest that you ask the seller whether they will accept “Vendor Finance”, as they might not have heard of this option and it could be the difference between you getting the business and not. It could also mean that you could buy a much larger business than you might have originally thought possible.

You might also want to take a look at Bowraven’s business purchase funding tool here.

We are looking for a business to buy in the Essex, Cambridge or East Hertfordshire region and can move quite quickly as we have the cash.

If the business you are selling is outside of this region and you consider it to be genuinely relocatable then contact me as well.

I am not too bothered what type of business it is except that I am not interested in hotels and pubs – all other businesses will be considered.

I do have cash available for businesses that are selling for up to £100,000 and can move quickly for the right business. So for example, if you are moving abroad, there is a death of the owner of perhaps you need to sell because of sickness or simply because of retirement.

If the selling price of your business is in excess of £100,000 and you are willing to take “Vendor finance” then please contact me too. I am in a good position to also raise money through loans for the right business and this can be discussed when you contact me.

I would prefer a business that is “recession proof” and is not in dire trouble because of the recent credit crunch and I will need to look at the last three years accounts at the outset.

So if you “Need to sell your business” please contact me via info@in-business.org.uk please with your details.

If you are looking to buy a particular business then why not post your requirements on here!

You never know – if you put the details in quite specifically and put the right key words then business owners in the industry you are looking for might well find your post and contact you!

You have nothing to lose!

If you are looking to buy a business then you might want to take a look at Bowraven.com’s Business purchase funding system – this will help you in your buying process.

If you are looking to sell your business then look no further!

Agents and other websites charge you a fortune to sell whereas in-business.org.uk is free! Simply register as a user on this forum “FREE” to register! Post your details and then wait for a buyer to find your post!

So if you want to “Sell your Business for FREE” get posting right now!

If you are a Business Angel or if you have some money to invest then please contact me!

I would like to put together a board of investors “Business Angels” if you like perhaps along the lines of “Dragons Den” whereby they each put up an amount of cash to be held in Escrow and then we invite business owners, budding entrepreneurs and new business owners and inventors to present to the “Investment Board” for investment in their new business.

So if you think you have what it takes – you have some spare cash – please note that the type of investment I am talking about is high risk so the cash we are talking about needs to be money you can afford to lose! However, with a very risky investment the upside can be very high too!

Please contact me on info@in-business.org.uk and let me know your details and we can meet to discuss. I am looking for five investors to begin with so please contact me and I can give you a bit more back ground behind myself.

Women’s wealth management firm Addidi will next month launch an all-female investment club with plans to invest £2m in British start-up firms and small businesses.

Addidi Angels is being set up by Addidi’s founder, Anna Sofat, the former managing director of financial advisers Destini Fiona Price. She is looking for up to 100 women to invest £10,000 a year over two years.

Ms Sofat, who created Addidi – Latin for “we inspire” – in March as a joint venture with financial services firm Punter Southall, is aiming to attract young, high-earning professional women looking for investment opportunities. “Addidi Angels will give [them] an easy and convenient way to invest outside the box,” she said. The club was, she added, likely to invest in socially responsible companies, and in “tangible” assets such as property and art firms.

Addidi has £40m of assets under management. It plans to reach £100m by the end of 2009.

News reported by The Independent

If you are in the position of wanting to sell you business you will no doubt be aware that there are 1000′s of other businesses on the market so why not try to get to as many people as possible.

If you post the details of your business here on in-business.org.uk it will be free and you never know the buy just might find your details here!

If you wantto remain anonymous to the public and of course to your staff then email us at info@in-business.org.uk and we will hold your details, in confidence, so that potential purchasers can contact us first – the alternative is that you simply set up an anonymous hotmail or yahoo email address and post that on here for people to contact you. Remember hotmail and yahoo email addresses are free – I prefer yahoo becuase they don’t delete your account after 30 days on not visiting the site!

Good luck to those business owners selling their business from in-business.org.uk!

Equally – to investors looking to buy a business please do not hesitate to post your requirements on our website for free too!