For someone wanting to get started in business, there are many points in favour of buying a business as a going concern. This avoids, on the one hand, the stress and headaches involved in starting a new business from scratch, and, on the other, the often irksome degree of control exercised by franchising companies. However, as many business owners have discovered to their cost, it is not really a good idea to grab the first business you see advertised, even if it seems to offer excellent potential, and even if you don’t want the hassle of a lengthy search. If you buy in haste, you are likely to repent at leisure — slow down and check out a few things first.

How To Buy A Business

First and foremost, you need to consider whether it is a type of business in which you have experience, or even an interest. This seems obvious, yet it is surprising how many people buying a business do not think of this until too late. If you are tempted by a hot dog stall because it seems to be making huge profits, but you have no experience in the food trade and hate the smell of hot dogs, you will not last long in the business.

Find Out Why The Business Is Being Sold

Once you have spotted what seems to be a suitable business, there are several things you need to look into, as many apparently attractive enterprises are not what they seem on the surface. Before buying a business it is of course essential to find out why the business is being sold. The owners may simply be retiring, or they may be selling up because they can’t make a go of the business. Don’t just have a brief conversation — get to know them, have a few drinks with them or take them out to dinner. The more time you spend with them, the better you will be able to gauge how honest they are being with you. Also be wary if they don’t want to talk to you.

How Healthy Is The Business

Business OpportunitiesIf you are satisfied with the reasons for the sale, you then need to look into the health of the business. Take a walk around the neighborhood and see whether there is a buzz, or whether there are lots of For Sale signs and boarded-up shops. If the immediate neighborhood is in decline, the signs are not good that this business has a promising future. Check when the lease is up — if you have to sign a new lease agreement shortly after buying, this could throw everything into uncertainty, as the terms of the new lease could be quite different.

The Numbers Say It All

It is then time to start on the crunch work, and check out the facts and figures relating to the business. It is a sad fact that many businesses for sale do provide seriously inflated figures for profits and sales in their advertising literature. Make sure you get hold of all the relevant paperwork, including the audited accounts and the financial records — if the sellers are not willing to provide the books for inspection, or if it is clear that the books have not been meticulously kept, walk away. It is advisable to employ professionals, including a lawyer and a qualified accountant, to look at the financial and other records.

You should also have professionals check the assets of the business, including property, equipment, contracts and even employees. Be very clear on which assets are or are not included in the sale, and if they are, what condition they are in. If equipment is out of date and needs replacing or upgrading, it could throw your financial projections into chaos. As well as assets, you should also of course check liabilities, such as debts. Make sure that equipment and vehicles are owned outright and are not subject to hire purchase agreements.

One Of The Key Reasons To Buying A Business Is The Customer Base

Buying A BusinessThe other major aspect when buying a business is to look at is the customer base. If there are only a few customers — some small businesses may have only one — what happens if a key customer goes out of business? How loyal are the customers and could they be easily poached by the competition? This is especially relevant if the customers have a strong personal relationship with the present owners. Carry out some discreet research to find out how strong this relationship is, and whether it would survive a change in ownership.

Buying a business as a going concern is a great way to get started, and the chances of success are much higher than when starting from scratch. However, no matter how excited you are when you think you have found your ideal enterprise, you must keep a cool head and look before you leap. As long as you are ruled by prudence and common sense, and keep emotions at bay, you have a great chance of making a wise and profitable investment.

 

 

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