Buying a business is a big exciting step. Even a small business can be a big investment, so with any acquisition this big it’s good to apply a little bit of ‘professional scepticism’. By that we mean ask good questions – of yourself, the business and your accountant and solicitor!
Here are seven things to consider before you buy:
- What do you want from the business? Is it purely to make money? Do you want a better work life balance so you are happy to accept a lower income? Is your work driven mainly for pleasure so, although you want an income, it doesn’t have to be significant.
- Is it likely the business you want to buy will achieve your objectives? Has it in the past? How do the current owners run the business? Make sure you set realistic goals.
- Do you know how much money / finance you have available to pay for the business? Has any required finance been agreed in principle? Do you have capital saved up or will you require alternative options for business funding?
- Have you done your homework? Do an online search to find out more about the business and its owner. Ask the seller for the last 3-5 years accounts and current management accounts. Scrutinise these to make sure they make sense and will provide you with the profit / income you require. Critically analyse the accounts for any red flags.
- Have you visited the business and met with the owner? Listen to your gut feeling. Gut feelings are often right. The owner may have an idea of the value they want for their business already and may discuss this with you. You want to feel confident you’re buying a business at the right price. We can value a business you want to buy to ensure you’re paying the right price and getting valuable information during the buying negotiations. Visit our mergers and acquisitions page to explore our support.
- How will you run the business in the future? Consider your involvement and whether it fits in with your objectives. Do you have experience in this industry? Do you know how the business will operate effectively?
- The best thing you can do early in the buying process is get advice from an accountant and solicitor
Ensure you get early professional advice from an accountant and solicitor so they can provide best advice and avoid any pitfalls.
A good accountant and solicitor will make sure:
- Everything is reviewed, looked at properly and that you are protected as much as possible.
- Due Diligence [link] is undertaken – meaning a thorough review of the business, legals and financials, so that you know exactly what you’re buying, with any issues highlighted. It’s much better to be aware of any potential issues before you are committed to buy to allow you to either amend the offer price to reflect the issues or withdraw from the purchase.
A good accountant will also help you put an offer together to put to the seller and will assist you through the negotiation process.It can be a complicated lengthy process and having good advisers by your side is invaluable. Visit our webpage on acquisitions to explore the specifics of how we guide you through each of the buying stages with your goals in mind.
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