Do you want a UAE Business?
Do you want to go into business in the UAE? First, you need to decide whether to have a clean sheet and start a new business or buy a business that is tried and tested. Obviously, your choice really depends on your circumstances in the UAE.
Choosing to Start a New Business
Most people looking to go into business usually already have another job. So, building a new business can be a strain on your time and money, especially when trying to get your first customers! However, the risk of starting your own business is that 20% of startups go out of business in their first year. By year 10, that has increased to 80% or more, depending on the business sector you’re in.
So, with limited time to work on the business, the major risk to your hard-earned cash, and the unknown of whether a business attracts customers and makes money, starting a new business is probably not your best choice.
Buying a Business
Buying a business that is already trading, has customers, and a good cashflow seems like a no- brainer. That takes away the time suck of starting a new business and reduces the risk of going out of business! The important thing in business is to reduce your risk exposure. So, you need to understand the advantages and issues of buying an existing business.
The Advantages of Buying a Business
The most obvious advantage to buying a business is that it already has customers, is trading and making money. It has good relationships with its suppliers, and it already has policies and procedures for dealing with customers and suppliers.
You get to see how it’s working. Often, an outside view can enable you to see how you can add more value when you buy it.
A good business will also have goodwill from suppliers and customers, which gives confidence that the business will continue.
The business will have its own branding, IP, and reputation, making it easier than if you’re in a new business to approach new customers, as potential customers may already be aware of what you sell and will trust you.
Issues to Check Before Buying a Business
When you buy a business, it’s vital that you check the following:
- First, can you afford the sale price?
- The business is still really a startup – so it has the same risks as any new business.
- Has significant debt – that means that unless you’re lucky, it’s likely to be a money sink!
- Long-term contracts – if the suppliers are expensive or simply unreliable, the business will be negatively impacted.
- Customers – will they leave if the current owner sells the business? If so, you’re back to square one and will need to hunt for customers.
- Will the suppliers maintain their current terms when you take over? If not, it will take time to get back to agreeable terms, which should be factored into a sale.
- Are all employees willing to work with you to maintain and improve the business? If they’re resistant to change, the business may not be the right one to buy.
- Are the accounts clear, with no apparent black holes?
So What’s Stopping You Buying a Business?
One issue is that you may be unaware of the businesses that are available for sale. However, there are sites and businesses that can guide you to good businesses that are worth purchasing.
Once you’ve found your business, check whether it has any of the issues we’ve discussed. Any one issue is not necessarily a deal breaker. However, you do need to be very thorough in your investigation or “due diligence.”
Be prepared to take some time to ensure buying a business is right for you.