Why buy an existing business anyway?
Most people from abroad who are interested in living and working in Spain are considering starting a business for themselves or getting themselves a franchise. Others consider buying an existing company. Although it may seem that starting your own business is the better way to go in Spain (based upon the description above of the typical business owners’ attitude towards selling) I truly feel, when you are new to the country, that buying an existing business will help you settle faster and gives you a better opportunity to earn a living. Spanish bureaucracy is horrendous and will suffocate most entrepreneurs from other Western European countries that are not familiar with the process. It is not uncommon to lose almost a year in getting permits and paperwork done just to open a business of which you are not certain that it will work. An existing business gives you a headstart and a proven concept if it has been successful in the past.
Obviously, you have to be prepared and plan the buying process carefully: you do not want to get trapped in a money losing business because you trusted the owner that everything was all right (“he was such a really nice old man”).
How to deal with a Spanish business owner who wants to sell
In all fairness, there is something we must admit in defense of the rather stubborn attitude of Spanish business owners. Most brokers, advisors or intermediaries working in Spain are not very professional (to say the least …). Quite a number of them try to charge sometimes outrageous upfront fees never to be heard from them again once an owner has paid. Or they provide a totally inadequate “valuation service”, overvaluing a company to please the owner and have him sign an exclusive representation contract that guarantees them a percentage over the sale and then sit and wait. The more listings the better for them.
When you are really interested in buying a business for yourself in Spain, you need to take the following steps:
1.- For sale by owner or by a representative
When you do your own searching and requesting of information, always ask if you are dealing with the owner directly or with a representative.
Do not assume, when you are dealing with a representative, that you will get a better treatment and more (or reliable) information, properly presented and prepared for your evaluation and analysis. As mentioned before, most representatives are utterly unprepared themselves to sell a business. Most of them are lawyers or bookkeepers (“gestores”, I already mentioned their “expertise”) helping out a client or friend the best they can. Ask always for credentials so you will know whom you are dealing with.
2.- What is it that is for sale
What is actually offered for sale: is it a legal entity (a limited or “sociedad limitada” or S.L. is the most common form in Spain) or is it an asset deal. There are important differences and serious consequences: taxes, legal responsibilities, financial obligations, labor laws etc.
3.- Ask for a sales dossier
When you do your own searching and requesting of information, always ask for a sales dossier on the business for sale.
You will find that most owners or their representatives do not have anything prepared. It is even worse: you will find that most of the time you will not even get a response on your reaction to an ad. In the best case, you will get an email asking you what it is that you want to know.
A word about the confidentiality agreement (a.k.a. non-disclosure agreement): it should not be a problem to sign one: just ask for an English version if you are not comfortable with the Spanish text.
Click here to get part 1 of this series of three articles
(See part 3 for the other steps to follow)