Business assets: definition

A goodwill is a set of intangible and tangible elements which constitutes a company's working tool and which gives it economic value. These items generally include:

The customers: This is the group of people who regularly buy goods or services from the company.
The right to lease or commercial property: It is the right to occupy commercial premises to carry out the activity.
Trade name or sign: It is the name by which the company is known to the public.
Intellectual property law: These can be patents, trademarks, copyrights, or other intellectual assets that are used in the course of commercial activity.
Materials and equipment : This includes all the equipment, machinery, tools, and furniture needed to carry out the commercial activity.
Commercial contracts: This includes supply, distribution, rental, or any other commercial agreement related to the business of the company.

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Why buy a goodwill?

Buying a goodwill is a smart strategy for those looking for an entrepreneurial opportunity with mitigated risks and immediate operational benefits. This builds on a solid foundation while paving the way for new opportunities for growth and success. Here are some of the main reasons why this decision can be made:

1. Immediate access to established customers

One of the major advantages of buying a business is access to an already established clientele. This allows the buyer to immediately benefit from the income generated by the business, without going through the long and uncertain phase of customer creation and development that usually accompanies the launch of a new business.

2. Risk reduction

Buying an existing business significantly reduces risks compared to starting a new business. The historical performance of the trade provides concrete data on its profitability and challenges, allowing the buyer to make more informed decisions. Additionally, with the operational structure already in place, the entrepreneur can focus on improving and expanding rather than starting from scratch.

3. Benefit from an established reputation and brand

Business assets often include a recognized trade name and brand. This means that the buyer immediately benefits from the fame and reputation built up over time, which can take years to build for a new business.

4. Obtaining financing facilities

Banks and other financial institutions are often more willing to offer financing for the purchase of an existing business because of its proven history. Profitability forecasts based on solid historical data make financing more accessible than for an entirely new business project.

5. Infrastructure and equipment included

Buying a business generally includes the infrastructure needed to operate the business, such as commercial premises, equipment, and sometimes even personnel. This saves the buyer from major initial expenses and the loss of time associated with the acquisition or implementation of these elements.

6. Opportunity for growth and innovation

By taking over a business, the entrepreneur has the opportunity to capitalize on existing foundations while bringing innovations and improvements to increase profitability. This may include introducing new products or services, optimizing operations, or expanding into new markets.

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Valuation of a business

Assessing the value of a business is a crucial step in the buying or selling process. By combining different valuation methods and taking into account the specificities of the business and the local market, it is possible to obtain a realistic estimate of the value of the goodwill. It is recommended to use valuation experts or commercial real estate professionals to obtain an accurate and reliable valuation. Here are various valuation methods that are commonly used:

Comparative method

This method involves comparing the business to other similar businesses that have recently been sold. However, it is often difficult to find perfectly comparable companies due to the specificities of each business. Despite this, this method can provide useful insights into market trends and reference values.

Valuation by turnover

One of the most common methods is to evaluate the goodwill based on its annual turnover. This approach involves multiplying the average turnover over several years by a coefficient specific to the activity. These coefficients may vary depending on the sector of activity and the geographical region. For example, in the restaurant sector, the coefficient may be around 50% to 100% of annual turnover.

Evaluation by EBE (Gross Operating Excess)

EBITDA is a financial indicator that measures the operational profitability of a company by excluding exceptional items that are not related to operations. To evaluate a business using EBITDA, simply multiply the average EBITDA over several years by a multiple specific to the activity. This multiple can be determined based on industry standards and comparative analysis with other similar businesses.

Value ranges and average values

It is important to note that there are value ranges and average values at the national level for different business activities. This data can be obtained from professional organizations, chambers of commerce, or specialized valuation firms. They provide a reference point for evaluating the relative value of a business in a given sector.

Special Considerations

The valuation of a business is not limited to financial aspects such as turnover or EBITDA. Several specific criteria can increase or decrease the perceived value of a business asset:

Its location: catchment, competition, parking lots...
Its configuration, its layout: adapted to the activity, aesthetics and functionality...
The conditions of the lease: duration, rent amount, termination clauses, renewal clause...
Equipment: quality and condition of equipment related to the activity...
Growth prospects: development potential, market trends...

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The legal aspects of buying a business

Buying a business involves a series of important legal considerations that must be taken into account to ensure the legality and viability of the transaction.

Legal Obligations

The acquisition of a business requires compliance with various legal obligations, which may vary depending on the sector of activity:

‍Operating licenses and authorizations : Depending on the type of activity, some specific licenses must be obtained. For example, a restaurant will require licenses to sell alcohol, while a pharmacy will require specific authorizations related to the sale of pharmaceutical products.‍
Safety standards : Safety standards are crucial, especially in sectors where risks are higher, such as catering, manufacturing, or personal services. It is essential to ensure that the business complies with all current regulations for the safety of premises and the protection of consumers and employees.

The commercial lease

When buying a business, you are buying the right to the lease attached to the fund. Generally it is a classic commercial lease, often called a 3-6-9 lease. It is a key element in operating a business.

This type of lease offers a minimum term of nine years, with the possibility for the tenant to cancel the contract every three years. This structure aims to offer stability to entrepreneurs while allowing them some flexibility.

It is vital to check the terms of the lease before buying a business. Items to review include the remaining term of the lease, renewal terms, specific clauses such as activity restrictions, and encumbrance and repair obligations.

Business buying process

The purchase takes place in several key stages, often requiring the intervention of legal professionals:

‍The sales agreement : This initial step formalizes the agreement between the seller and the buyer on the terms of the sale and the obligations of each of the parties. The compromise specifies the elements included in the sale, the price, and the conditions for completing the transaction.‍
The act of sale : After the compromise, the final act of sale is drawn up, often by a notary. This act officially transfers ownership of the business from the former owner to the buyer and ensures that all legal requirements are met.

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Purchase financing

Financing the purchase of a business requires careful preparation and a good knowledge of the various options available. A well-planned approach and well-conducted negotiations with funders can greatly influence the terms of financing, improving the chances of success for your new business.

Financing options

Several solutions can be explored to finance the purchase of a business:

Bank loans: Banks offer various types of commercial loans that can be tailored to the specific needs of the acquisition. It is important to compare offers to find the best rates and conditions. To do this, you can use a broker.
Seller credits: This option implies that the seller of the business finances part of the sale price, which the buyer reimburses according to an agreed schedule. Seller credit can be useful to fill a lack of bank financing.
Alternative financing: Consider alternative funding sources such as crowdfunding, crowdfunding, crowdfunding, or private investors. These methods may offer more flexible terms than traditional loans.
Government grants and grants: Depending on the location and industry, there may be grants or support programs available for business acquisitions.

Negotiating with banks

When negotiating your financing, a well-structured business plan and solid financial forecasts are essential:

Business plan: Present a plan detailing the operational strategy, target market, growth projections, and how you plan to manage the business. This will demonstrate your understanding of the business and your ability to make it profitable.
Financial forecasts: Include forecasts for revenue, cash flow, and profitability for the short and medium term. This information will help lenders assess the risk associated with the loan.
Guarantees and insurances: Banks may require collateral or insurance to secure the loan. Prepare the necessary documents to prove the value of the goodwill assets.

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Post-purchase transition and management

Effective management after the purchase of a business is crucial to ensure the continuity of operations and the growth of the business. Here is how to structure this period:

The handover

The transition period is a key moment that must be carefully organized to ensure a smooth transfer of power. During this phase, the seller should introduce the buyer to the intricacies of the business, including the inner workings, key procedures, and computer systems. It is also important for the seller to introduce the buyer to key partners, suppliers, and important customers to maintain strong business relationships. This period can vary in length depending on the complexity of the business, but it generally lasts between a few weeks and several months.‍

Development plan

After the effective takeover, it is essential to draw up a detailed development plan for the first few months. This plan should include:

Optimization of operations: Revise and improve business processes to increase efficiency and reduce costs. This may involve upgrading technology, reorganizing staff...
Customer development: Implement strategies to strengthen relationships with existing customers and to attract new ones. This may include marketing campaigns, promotional offers, or the introduction of new products or services.
Financial analysis: Monitor financial performance regularly to quickly identify areas that need adjustments or improvements.
Continuing education: Provide ongoing staff training to ensure that all teams are up to date with industry best practices and innovations.

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Conclusion

Buying a business is an approach that requires careful preparation and in-depth analysis. By following this guide, you'll be better prepared to make informed decisions and succeed in your new business. For personalized support or specific questions.

Do not hesitate to contact our agency and make an appointment! We are here to help you successfully carry out your entrepreneurial project.