Buying a business is for most people, a big move, a life-changing move and not a step to be taken lightly, unless you are among those few who can afford to do it without risk to yourself or your status!
Why seek to buy a business? There may be a need, for example, to remove competition for your existing business, or to complete a planned expansion or diversification.
Some of us might see buying a business as an easy way to secure an income and enjoy the freedom of self-employment or alternatively as a ‘last chance saloon’ because of a lack of employment opportunities. Both of these latter examples in particular, should prompt a great deal of soul-searching and reflection, before any move is made.
In considering buying a business, the other side of the equation also requires a great deal of thought – what business should we buy as desirable and what should we guard against as being a bad investment?
On the market there will be both good and bad businesses, businesses with potential and some with no viable future whatever. How do we pick a potential winner, where any future failure won’t be because of the ‘horse’ we pick and winning will be possible with us in the saddle?!
When buying an established business the following ideas may be helpful:
1. Are you sure that buying is something you want to do? Don’t just buy because it seems to be a good idea – any purchase will mean work for you – work that you could be stuck with for some time.
2. How long has the business been on the market? Too long? If so, is there a problem?
3. How does the business operate? What are the demands on you likely to be? Are there long hours or seasonal variations in demand?
4. Is this a business you will enjoy working in, where you are happy to relate to customers and suppliers? Do you have confidence, relevant understanding and skills and a desire to learn?
5. You will need advice and support from an accountant and a solicitor to check the financial and legal details. What are you buying in terms of assets – leasehold or freehold? Are you buying facilities, equipment and stock in good order?
6. Is this a simple business purchase or are there other stakeholders within the package, such as partners, affiliates or franchisees?
This is a time for ‘due-diligence’ – better to be safe before you move, than surprised and sorry later!