What to consider before buying a business?

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Acquiring a business can be a life-changing opportunity, especially for those looking to start fresh in a new country. Whether you’re an entrepreneur chasing the dream of owning a successful enterprise or an immigrant seeking to establish roots through a stable investment, the journey of buying a business is both exciting and challenging. However, it’s not just about writing a check and signing a contract—it’s about understanding the market, aligning the business with your skills and goals, and making informed decisions that pave the way for long-term success.

To begin with, careful planning and a step-by-step approach are essential. By doing so, you can confidently navigate the complexities of the acquisition process while avoiding costly mistakes. With that in mind, this guide will help you explore the critical factors to consider before taking the plunge, ensuring your business journey starts off on the right foot.

Alliance Leman with international experience in company acquisitions

At Alliance Leman, we’re dedicated to supporting you throughout the decision-making process of acquiring a new business. That is why we’ve crafted the “Business beyond border” series to inform your decisions. These articles are written based on our involvement in the strategic acquisitions of top international companies. This article, is part one and offers a high-level roadmap to guide your acquisition journey.

Furthermore, we’ll dive deeper into each step of the decision-making process in a series of dedicated articles. These follow-up pieces will break down the complexities of market analysis, business evaluation, and acquisition strategies, offering actionable advice and real-world examples. Whether you’re an entrepreneur or an immigrant seeking new opportunities, our goal is to empower you with the tools and knowledge to succeed in your business venture.

In part 2, we provide you with frameworks to help you strategically approach your market selectionIn part 3, we guide you to think strategically on deciding between buy or buildIn part 4, we give you our guidelines for defining the best criteria to evaluate the target businesses against. 

1. Consideration: What is the right market?

Selecting the right market is arguably the most critical step in planning to buy a business, as it lays the foundation for your success. The market you choose will determine your ability to grow, adapt, and navigate risks in a new and often unfamiliar business environment. For immigrants and newcomers especially, this decision is especially impactful, as it provides the opportunity to leverage unique skills, cultural insights, and professional networks to carve out a competitive advantage in your chosen market.

Moreover, a well-researched market selection process helps you minimize uncertainty and set the stage for sustainable success. For instance, whether you’re targeting an emerging industry with high growth potential or focusing on a stable, mature sector, ensuring alignment between your personal strengths and market dynamics is essential.

Tools for market analysis before buying a business:

To help you choose the best market, you’ll need a structured approach to analyze its potential. Here are three essential frameworks to guide your decision:

  • SWOT Analysis: A SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) helps you evaluate the landscape of the market. For example, in real estate investment, a strong demand for rental properties can be a major advantage, while the risk of market saturation or high competition may be a concern. If you want to learn more about SWOT, this is a good article to read.
  • PESTEL Analysis: This framework expands your view to include political, economic, social, technological, environmental, and legal factors that may impact your decision. y understanding these external influences, you can identify which markets are more stable and aligned with your goals. If you want to learn more about PESTEL, this is a good article to read.
  • Porter’s Five Forces: Use the Porter’s five forces framework to analyze the competitive dynamics of your target market. By analyzing the competitive forces within a market, you can better understand the threats and opportunities you’ll face. Specifically, it assesses barriers to entry, the bargaining power of suppliers and customers, and the threat of substitutes. If you want to learn more about Porter’s five forces, this is a good article to read.

For immigrants or expats, it’s particularly important to understand the regulatory framework of the country and the industry you’re entering. Ensure the market aligns not only with your skills and experience but also with your long-term goals. Ultimately, ensuring the market aligns with your skills, experience, and long-term goals will set you up for growth and create a strong foundation for a successful business acquisition.

2. Consideration: Should you buy or build?

Once you’ve chosen the right market, your next big decision is taking a step back and asking yourself: Is buying the best option for me, or does it make more sense to build my own business? To clarify, this isn’t just about weighing the pros and cons—it’s about ensuring the decision aligns with your long-term goals, risk tolerance, and available resources. 

For many, especially immigrants, acquiring an established business might seem like the obvious choice due to the immediate access it provides to customers, cash flow, and operational infrastructure. However, for others, starting a business from scratch may offer more creative control and the opportunity to tailor every aspect of the business to their vision.

In either case, this decision is a pivotal moment in your journey, as both paths come with their own set of challenges and opportunities. Therefore, reflecting on these factors will help you make a choice that sets the stage for a successful venture.

Making the case for buying a business

Both options can lead to success, but here’s how they differ:

  • Buying a Business: This option allows you to skip the early, uncertain stages of business development, giving you a head start with an established customer base and operational systems. However, it may require adapting to existing structures or addressing hidden issues within the business.
  • Building a Business: If you prefer to create something entirely your own, this path gives you full creative control, but it’s a longer and more resource-intensive process that requires a deep understanding of the market.

To make the best decision, use a Pro/Cons Matrix to weigh the benefits and drawbacks of buying versus building, see some examples below (If you need some inspiration for this reflection:

  • Advantages of buying an existing business: Immediate market access, Proven track record, Existing infrastructure
  • Challenges of buying an existing business: Higher Initial costs, Integration challenges, Hidden risks
  • Advantages of building a business from scratch: Complete creative control, Innovative opportunity, Flexibility
  • Challenges of building a business from scratch: High time & effort requirement, High uncertainty, Resource-intensivity

Key Considerations to Help You Decide

Ask yourself the following questions to clarify whether buying or building is the best choice:

  1. What is my timeline? If you need immediate results, buying a business might be the better option. Building requires a longer-term commitment.
  2. Do I want full creative control? If you want to innovate or create something unique, building from scratch could be more fulfilling.
  3. Am I prepared for the upfront costs of buying? Acquiring a business comes with significant initial expenses but may offset long-term risks.
  4. Do I have the expertise to build a business? Building requires not just resources but also deep local knowledge and an ability to create a market presence.
  5. How much risk can I tolerate? Buying reduces some risks with established operations, but building can lead to greater rewards if successful.

Choosing to buy or build is not just about resources; it’s about what fits your vision and goals. If you’re seeking immediate access to a proven business model and market presence, acquisition may be the right choice. However, if you’re passionate about creating something entirely your own and willing to invest the time and energy, building from scratch could be the perfect path. The key is to think critically about what aligns best with your personal and professional aspirations.

3. Consideration: What is your ideal business to buy?

Before you begin your search for potential businesses, it’s essential to define your criteria for what you need. This is your roadmap, guiding you towards businesses that meet your specific goals. Align your criteria with your risk tolerance. For instance, if you’re risk-averse, you may prioritize businesses with strong financial health and a solid customer base. In order to define your risk tolerance, you should build your investor profile. We will write about this in our future articles, so stay tuned!

Key criteria to include in your business evaluation:

  • Financial Health: The financial health of a business is crucial. Review key financial statements—profit and loss, balance sheets, and cash flow statements—to understand how financially stable the company is. Metrics like profit margins and return on investment (ROI) will help you assess the business’s ability to generate sustainable profits.
  • Market Position: Evaluate the company’s position within the industry. Does it hold a competitive advantage, such as strong brand recognition or technological innovation? Or is it struggling to maintain its market share?
  • Operational Fit: Assess whether the company’s operations align with your strengths and experience. A company that aligns with your expertise will be easier to manage and scale.

4. Consideration: Do you have a running list of businesses that come on the market and fit the bill?

After defining your criteria, the next step is to build a pipeline of potential acquisition targets. This stage is akin to gathering a list of properties that fit your specifications. The broader your search, the higher your chances of finding the right fit for your needs. However, be mindful of how competitive the market is for these businesses. A wider search may uncover hidden gems or present you with more competition.

Tools for building a pipeline of target businesses to buy:

  • Business Brokers: Business brokers can help identify companies that are available for sale. These professionals are familiar with the market and can provide valuable insight into potential acquisition targets.
  • Industry Data Platforms: Platforms such as BizBuySell (link to the platform) and Mergers & Acquisitions provide data on businesses for sale and market trends. These can help you identify businesses in the sectors you are interested in.
  • Networking: Word of mouth in the business community can uncover opportunities that aren’t publicly listed. Attending industry events and engaging with local business networks can provide leads on available businesses for acquisition.

5. Consideration: Which target is worth your time to further pursue its acquisition? (Commercial due diligence)

Before you proceed with a more in-depth evaluation, it’s important to conduct a preliminary check of the business to ensure it’s worth pursuing. This phase helps you decide whether it’s worth it to move forward with detailed evaluations and due diligence. 

Commercial pre-due diligence checklist:

    • Is the business in a growing segment of the market? Ensure the business operates in a market with growth potential. A stagnant or declining market poses long-term risks, while a growing market offers expansion opportunities
    • How strong is its position in their market segment? How does the business differentiate? Assess if the business holds a competitive advantage. Strong market positioning, coupled with clear differentiation (e.g., brand, innovation), is essential for sustainable success.
    • Does it have the ability to defend its position? A business that can’t defend its position is more vulnerable to market changes and competitors, which can jeopardize your investment. Evaluate how the business can protect itself from competitors or market disruptions. Strong IP, loyal customers, or regulatory barriers provide defensibility.
    • Is there potential to expand the underlying market of the business? Look for opportunities to grow the business through geographic expansion, new products, or targeting new customer segments.
    • Who are the businesses direct and indirect competitors? How do they benchmark against the customers key purchasing criteria in the market? Identify direct and indirect competitors and see how the business measures up in key areas like pricing, customer satisfaction, and product quality.
    • Are there any red flags (e.g., legal issues, compliance risks)? Check for potential legal issues, regulatory non-compliance, or other risks that could create problems down the line.

Important: If there are risks, red flags, or considerations, no need to immediately  eliminate the business from your target risk. You should also consider any potential mitigation plans and how feasible they are in order to assess the risks

6. Consideration: Are the businesses finances in order? (Financial due diligence)

Once you’ve decided to move forward with a business, it’s time for a thorough financial analysis. This stage is critical for confirming that the business’s financial health aligns with your expectations and that you’re not taking on unexpected liabilities. This stage is where you check whether the business’s financials match the seller’s claims or previous records, helping to uncover any discrepancies or hidden risks. In order to do this, you should get access to and dive in the key financial statements, i.e. Income statement, Balance Sheet and Cash flow statement of the last 10 years of the business. If you are not familiar with the key financial statements, read this article.

Next to a historical view, the seller should also provide you with a seller’s Business Plan (BP) on how they had foreseen the business to perform in the future, and what investments the business would need to achieve that. The buyer should typically have his/her own critical view of the seller BP, called the buyer BP, which he/she would use as the basis for the valuation of the business. We will dive into this in a future article!

Key ratios and metrics to check on the financial statements:

  • Profit Margins: Profit margins provide a clear picture of how much of the business’s revenue is converted into profit. Higher margins typically indicate greater efficiency in operations.
  • Return on Assets (ROA): This metric shows how effectively the business utilizes its assets to generate profit. A higher ROA suggests that the business is using its resources more effectively.
  • Debt-to-Equity Ratio: This ratio helps you understand the business’s leverage. A high debt-to-equity ratio can indicate that the business is relying heavily on debt to finance its operations, which may be a risk if the business faces financial difficulties.

7. Consideration: Does the business pass your full due diligence?

At this stage, you’ll perform a full due diligence review to assess all aspects of the business, including its legal standing, operational systems, technology, and compliance with regulatory requirements. This step is essential to uncover any hidden risks or liabilities before finalizing the acquisition. Different sectors require different focus areas. In real estate, for instance, operational and legal checks might take priority, while in tech, evaluating the company’s IT systems and cybersecurity is crucial.

Key areas for full due diligence:

  • Legal: Review all contracts, intellectual property rights, and any potential legal disputes that could arise post-acquisition.
  • Supply Chain: Understand how the company sources its materials, the stability of its suppliers, and its resilience against disruptions.
  • Technology: Assess IT systems, cybersecurity, and whether the company’s technology infrastructure needs an upgrade as well as the potential costs of upgrading or replacing them.
  • Operations: Examine production processes and any capacity constraints or operational inefficiencies.Make sure you already know if the business is constrained by its current capacity and if it needs heavy capex investments to maintain its market share, etc.
  • Health, Safety, and Environmental (HSE): Ensure that the business adheres to relevant health, safety, and environmental regulations.

8. Final consideration: How will the transaction look like?

Once full due diligence is complete, you’re ready to finalize the deal. This involves negotiating the terms, agreeing on the purchase price, and preparing the final purchase agreement. At this stage, it’s advisable to seek legal and financial counsel to ensure everything is in order before the deal is closed.

Final word

In this series, we’re focusing on the strategic thinking you need to master before buying any business. These steps are universal and apply to businesses across all geographies, helping you minimize risks, make informed decisions, and set yourself up for success. Whether you’re a first-time buyer or an experienced entrepreneur, following a structured approach ensures you’re prepared for the challenges ahead.
In the upcoming articles, we’ll dive deeper into each of the steps outlined in this guide, offering practical advice and actionable insights to help you navigate the complexities of acquiring a business. From understanding market dynamics to conducting thorough due diligence, we’ll explore every stage of the process in greater detail.


Additionally, we’ll cover the full lifecycle of an M&A deal from the buy side, breaking down each phase and sharing real-world examples to illustrate key concepts. Our goal is to equip you with the tools, strategies, and confidence to approach any acquisition opportunity with clarity and purpose. Stay tuned for the next installment in this series!

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