Focus Economics reported that India’s GDP grew from 7.2% in 2014 to 7.6% in 2015, which is very good news for entrepreneurs. Due to measures improving education, health and standard of living the middle class is expanding leading to excellent development in the private sector. Almost 60% of the Indian economy relies on private consumption so investors can benefit from this booming market.
Questions to ask yourself
Of course, the basic steps for purchasing an existing business are pretty much the same all over the world because it’s only logical that you prepare yourself for it.
What are my strengths?
Go to people who know you well and ask them to define your strong and weak points. Check your past work and academic records to build a personal profile that tells you which business role or category would suit you.
Have I got the resources?
You cannot proceed without sufficient funds so first you need to secure them. Make a rough estimate of business values in the market to help you gather a suitable amount.
Do I have professional support?
You will need to hire an accountant, lawyer, banker, insurance expert and business broker to get started with your project.
Is it worth the effort?
Purchasing an existing business may be risky so make sure you have something to fall back on if the unexpected happens and you face loss.
Acquiring an existing business in India
Now that you are in the right frame of mind to buy a business, move to the next stage.
It may sound strange but you must understand the reason why the business is on the market. If it is a failure then it will probably not make a good investment unless you are Rumplestiltskin.
Is it something you love doing?
Passion is half of success when it comes to business because it is the ultimate drive for an entrepreneur. Without being invested in your business heart and soul, you will not be able to generate new ideas and it will become stagnant.
Even if your interest matches, it might not be the best time to purchase that business due to low stocks or some other issue. Sometimes demand for a product/ service suddenly falls so you need to be patient then. Wait for the perfect market conditions to make an offer. For instance, restaurants, fashion stores, beauty salons and IT companies are thriving in India this year.
The most important step is checking the company’s financial state since its establishment particularly recent performance. This will give you an idea of its growth and future potential. Don’t just look at the documents, make it a point to visit the location and survey the hardware, software and management.
Offer and negotiation
When you are satisfied with the company’s market position, extend an offer to the seller. Tim Ferriss explained how Indians are masters at negotiation so beware. They cleverly make a proposition that gives them maximum profit and play mind games. It is a tactic that ensures no one cheats them of their rights so always be fair and honest in your dealings with Indians.
Letter of Intent and closing
A non-binding agreement like a Letter of Intent (LOI) is always better because it allows greater freedom to scrutinize the company before Due Diligence and signing the final documents.