Owning a business in Singapore is a yet-to-be-achieved millstone for many entrepreneurs. But, building a business from scratch is not the only way one can own a business in Singapore. Buying an existing business in Singapore too is a good idea. But you cannot buy just any business that is up for sale. Here, we are giving you a few tips to make your buying decision more profitable.
Have a well-defined target – As we said earlier, you cannot buy just any business that is up for sale. Before exploring the businesses that are listed for sale, you should clearly define your niche. If you already own a business in Singapore or any other part of the world, consider buying a business that is in the same industry. Even if you are planning to diversify your industry, you should have a proper plan to do so. Choose a business that can complement your existing one.
Plan your finances – Once you have decided your target business industry, you can start scanning the market for businesses that are being sold in your target niche. But it still is not the time to approach the business owner to start the negotiation. Before doing so, you should make sure that you have sufficient funds for completing the purchase. We do not say that you should have the cash ready in your bank account. But, you must have a sure-fire plan about the fund you’ll exploit for bringing the finances as and when required. There are many disadvantages of starting negotiation without having the sufficient fund. The scariest of them all is a breach of contract from your side due to lack of funds. This will not only snatch away the opportunity but also cause you heavy financial loss.
Sign a letter of intent – Once you have your finances ready, you can contact the business you are interested in buying. You can do this directly or through a professional agent. When the seller is ready to enter into a negotiation, you should draft and sign a letter of intent. This letter will not be a binding contract in its power but the contents of the letter play an important role if a dispute arises at the time of creating a real contract. So, you should get it done by a professional. You can add exclusivity clause to the letter if you do not want the seller to enter into a negotiation with someone else in the same time period. Confidentiality or non-disclosure clause is advised as a preventive measure. It will obviously bind you as a buyer for not disclosing any important information about the company. But it will also keep you safe if you finally buy this business because the seller will be bound not to share any information about the business with a third party.
Show due diligence – There’s so much fraud in the world that you cannot trust anyone with closed eyes. So, don’t entirely rely only on the information provided by the seller. You need to cross-check everything. You can take help from reputable service providers like e-sandhurst.com to get the facts cross-checked by methods like forensic accounting. This will not only tell you about the fairness of the accounting and general operations of the business but will also save you from over-paying to the seller. It is important to get every calculation done from your end to be sure that you pay only the fair price for acquiring the business. In addition to the accounts, you should also make sure that the compliance rating of the business is not very bad.
Make the contract legally binding – Once you have gone through the above-mentioned steps and decided to buy a business in Singapore, you need to get it into a legal contract. Handling over the property keys and important documents will not legally make you the owner of the business even after making the full payment. You need to get everything written on paper and get it signed by both the parties in addition to the authorized professionals. This contract will be the final agreement between you and the seller of the business, so, add the clauses very carefully and also make sure to understand the clauses added by the other party. You need to make sure to bind the party for not disclosing confidential information about the company. And, also restrict the person from starting a competitive business for at least a certain period.