If you are planning on conducting business in the UAE, it is possible to buy a ready-made company. Before buying anything though, it is important to make sure that the company has a good reputation and has already established a base of customers and suppliers. You will also need to carefully weigh the pros and cons of buying a ready-made business and learn everything you need to know about the company’s documentation, reports, contracts, customer feedback, business plan, and so on. This will help you to make the right decision regarding buying a ready-made business or starting your own from scratch, as well as help you to think about how you want to further develop your business.
Why it is advantageous to buy a ready-made business
If you buy a ready-made business that is already well-established, it will immediately start bringing in profit for you. The main thing is that you choose a company that already has a name on the market and is clear of any financial problems.
Here are some of the potential advantages of buying a ready-made business:
- Qualified staff with experience working for the company, so you don’t need to hire and train new employees;
- Fully equipped offices, warehouses, etc.;
- Customer, partner and supplier bases have been established, so you don’t have to spend time and money on building these bases from scratch;
- An established reputation, which will make it easier to achieve certain goals such as getting a bank loan, expanding your partner network, attracting qualified specialists and more;
- The business model has been created and is in place in the structure of the company;
- The possibility to immediately generate profit since how the company operates has already been fine-tuned;
- Lower risks involved thanks to the company already being established and the ability to more accurately predict future development.
Risks and challenges
A successful company with a good reputation and well-established business practices is usually expensive. If you haven’t properly read up on the ins and outs and even the minute details of the company you are considering buying, you could encounter a variety of problems. Some of these include:
- Unpaid debt that the previous owner kept hidden;
- Dissatisfied customers or partners that could negatively impact the image and reputation of the company;
- Outdated equipment and systems that will need to be updated or replaced;
- Conflicts amongst the team and/or employees that lead to decreased performance or a high employee turnover rate.
If you choose to build your company from scratch, you will be in charge of deciding which jurisdiction you want to set your company up in, what type of company it will be, what it will be called, who will be employed there, and much more. Whereas, if you want to buy a ready-made company, you will have to choose one that is available for sale, not necessarily one that meets all your needs and expectations.
For example, if you don’t like the name of the company, you can change it. However, this can be a slow and complicated process due to having to change all the documents associated with the company, such as bank details, immigration cards, and so on.
How to avoid ‘buying a lemon’
Before concluding a deal, it is important to thoroughly check every aspect of how the company functions, such as:
- Financial situation – analyse the accounting and tax statements, bank accounts, the movement of funds, credit history, etc.;
- Statutory documents – check whether or not they have been properly executed and are in compliance with the legislation;
- Relationship with the local partner – if you are buying a mainland company, you should be aware of the extent of control this partner has over the business;
- Client base – find out how many clients the company has, how many contracts have been fulfilled and how many contracts are in the process of being fulfilled;
- Employment contracts – confirm whether or not they comply with the local labour laws;
- Lease agreement – if the company rents its workspace, find out what the relationship with the landlord is like and if this agreement will be continued in the future or terminated;
- Reputation – check whether or not the company has had problems with the law, conflicts with clients or partners, negative publicity in the media, and so on.
It is also important to find out why the owner is selling the business in the first place and what the owner’s relationship with the founders, staff and partners is like.
Before buying a company, make sure that you like the business concept, its corporate principles, the staff and the work environment. Keep in mind that if you seriously want to change something in a well-established system, you run the risk of damaging the business and reducing potential profits.