Purchasing an existing business is a good method to avoid some of the startup expenditures and developing hardships of opening a company from start. However, investing in an already-running enterprise carries its own set of dangers, and the transaction itself is difficult to complete. This manual assists you in learning how to purchase a small business in Bulgaria.
Economy of Bulgaria
Bulgaria offers a very beneficial climate for conducting trade. Numerous factors make doing trade in Bulgaria beneficial, such as its thriving outsourcing industry, skilled and bilingual labor, excellent infrastructure, and low tax rates in the EU.
You can either start a business there or buy an existing one if you want to benefit from the developing economy and skilled workforce in Bulgaria.
Step-by-step; guide to purchase
Finding a firm that is for sale and doing thorough research are two steps in the process of buying a business. You can start along that road with the assistance of the next few steps.
- Search for the right business
Choosing what kind of organization to purchase is the first step. Start by examining a sector of business you are familiar with. For instance, purchasing a retail store can be a terrific match for your abilities and expertise if you have a lot of knowledge of operating in the retail industry.
Success in a field where you have little expertise or desire might be challenging. However, having prior industry experience can provide you with an advantage because you are already familiar with the trends, difficulties, and possibilities.
- Evaluate the business
Analyze the reasons for the business’s selling when you’ve located it. Is the CEO just about to retire or has he had enough of the business? In that scenario, you may contribute some fresh ideas and enthusiasm to aid in the expansion of the enterprise.
However, certain justifications for selling might constitute warning signs, and it might require a bit more effort to find them. For instance, you can have an ongoing struggle as soon as you take over if the corporation is losing clients to a more well-known rival or has a poor image.
- Evaluate the profit
A corporation can be valued using a variety of techniques depending on its earnings, forecasts, and capital structure. Each approach has benefits and drawbacks. The fair market worth of a firm’s corporate resources is added up, and its debts are subtracted, to provide an asset-based company valuation.
The income methodology to valuation entails evaluating the net income that the company is anticipated to generate over a specific period.
- Issuance of LOI
You can start learning more about the enterprise with a letter of intent. The LOI shows the seriousness of the buyer. If a bidder isn’t serious, most sellers won’t divulge specific financial, tax, and legal details.
- Due diligence
To avoid any expensive shocks after the sale, you must conduct as much study as you can about the company during the purchase process. Find out from government organizations what certifications and approvals the firm requires and whether it is in excellent condition.
Make certain the company genuinely holds all the assets it purports to own by reviewing leasing and loan contracts. Examine any important corporate deals to determine how they will affect the company. Additionally, look into any lawsuit that the company or the present owner of the enterprise may be involved in.
- Close the deal
It’s time to complete the purchase contract after you’ve completed your thorough research, decided on a purchase price, and obtained funding.
The sale might be structured in one of two ways: as a stock acquisition or a purchase of assets. You acquire the company’s shares along with all of its resources, debts, agreements, etc. when you buy stock in it. In an asset purchase, the seller keeps ownership of the corporate body in a legal sense even though you buy all of the corporation’s assets.