There are several options for setting up your own business.
You can start from scratch or buy a business.
This encompasses everything needed to run a business, including tangible and intangible assets.
It represents a global economic entity and can be sold or transferred.
Why buy a business?
Rather than setting up a new business, buying a business offers a number of strategic advantages.
By taking over an existing business, you can immediately benefit from the existing dynamic.
The buyer is able to capitalize on the seller’s already-established clientele, as well as his relationships with suppliers and his reputation in the region.
What’s more, buying goodwill offers the opportunity to make adjustments to an already operational entity.
Rather than starting from scratch, the buyer builds on the seller’s existing foundations, saving time and resources.
Prior knowledge of the market, internal processes and the entity’s strengths also simplifies the implementation of positive changes.
Selling goodwill can be less risky than starting a business from scratch, as the existing customer base offers a certain level of stability and predictability.
How profitable is it to buy a business?
Before assessing the profitability of a business, it is crucial to emphasize that the main advantage of acquiring a business lies in its operational status.
The buyer uses the dynamics of the business to transform it.
Buying a business with a consistent value and selling price enables you to stabilize your budget.
The asking price is based on previous profits, rent and leasehold rights, location, customer loyalty, accessibility and competition.
The future buyer carries out a complete diagnosis of the intangible and tangible elements to assess the commercial potential and its value before buying a business.
A capital gain or loss can then be detected.
The business activity is studied to determine its development potential.
An analysis of the means of production, their efficiency and maintenance costs, are also part of the diagnosis.
The legal, human, quality-safety-environmental and financial aspects all contribute to assessing the strengths and weaknesses of the business.
However, it is through EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization), sales and the operating margin rate that it is possible to determine the lifespan and potential profits before buying a business.
To evaluate the business, we need to analyze the financial statements and the market value.
Only projections for the coming year will enable you to determine the profit margins that will enable you to buy a business with full knowledge of the facts.
Ignoring risks and underestimating costs can lead to a biased estimate.
Legal conditions and formalities
Anticipation, preparation of the business case and a business plan are the key steps in buying a business.
In addition to the business plan, the buyer must ensure that all conditions and agreements are respected.
The sale of a business is sealed by the signature of the seller and the buyer on the deed of sale.
This stipulates the sale price, the name of the previous seller of the business, the status of any liens and pledges on the business, the characteristics of the commercial lease and the results of the last three financial years.
The percentage of sales between the month preceding the purchase and the end of the last financial year should be provided to encourage the buyer to purchase a business.
The seller of the business must complete a number of declaratory formalities, such as officially declaring the planned sale to the town hall, and informing employees so that they can make an offer if they wish to buy the business.
The buyer must file the deed of sale with the local tax office and register it with the business tax office.
A notice will be published in a legal gazette once the sale has been completed, while registration to buy a business is done via the guichet unique des formalités des entreprises website.
How to finance the purchase of a business?
When selling a business, the seller disposes of tangible assets (tools, machinery, furniture and vehicles) and intangible assets (patents, leasehold rights, employment contracts, clientele, brand names and operating licenses).
Receivables and debts are not included.
The question of financing also arises when buying a business.
Professional micro-credit, personal contributions, participatory financing and loans are all avenues that can be exploited to make this financial investment and buy a business.
Several schemes exist to support entrepreneurs who want to buy a business. The Garantie Transmission facilitates access to bank credit, the Crédit d’impôt makes it easier for employees to take over a business, the Aide aux Créateurs et Repreneurs d’Entreprise provides exemptions from social security contributions, while the Prêt d’Honneur Solidaire helps to obtain financing to build up funds – under certain conditions – and buy a business.
Who can own a business?
Any individual or legal entity wishing to set up a franchise can purchase a business.
To take over a brand name or a commercial activity, you need to have the financial resources to get the business up and running again.
It is advisable to consult a lawyer and a chartered accountant when purchasing a business to ensure compliance with formalities and tax regulations.
