There’s no doubt that buying a business is an exciting time. To hit the ground running as an entrepreneur it can make great sense to buy an exiting business that’s already established and if you’ve got the right capital behind you, this can be a great way to get into an industry that you’ve always wanted to get stuck into. However, buying a business is not something you should leap into unprepared so here are my top 8 tips to get you ready…
- Goal Setting – Why are you buying a business in the first place? If it’s just about leaving the rat race and being a wage-slave, then think again. Before you embark on this venture you need to be honest with yourself about why you’re doing it and set some clear and realistic goals about what you want to achieve. Having a game-plan from the outset is fundamental to any business venture.
- What industry? – What industry are you entering and why? Childhood dreams of owning a business is one thing and clearly the reality is another. Certainly, some businesses sound more exciting than others and it’s easy to be seduced by something that sounds like it will be fun, adventurous and dynamic. But is that really you? This is where you need to put your sensible head on and understand what skills you have and what you can bring to the party. Clearly an industry that you have some experience and worked in will give you a head start rather than a business that you have zero knowledge of.
- Research – There are hundreds of companies out there that sell businesses so do your research and see what fits in with what you’re looking for. Check out reviews, read testimonials and examine their websites thoroughly until you find a company that you feel comfortable working with.
- Arrange a Viewing – once you’ve honed-in on a business that you’re interested in, then organise a viewing. Listen to your brain and not your heart and trust your gut-feeling. If it doesn’t feel right despite how excited you might be, then you should walk away.
- Check the facts and figures – If the viewing goes well and you can see a future for you and the business then it’s time to get some professional help. Ask an accountant and a solicitor to check over the books and the legal aspects of the business to ensure that everything is as it should be. Seek counsel from your friends and family as well to see what they think. It’s always good to get different perspectives and whilst lots of opinions can be confusing, it pays to have a well-rounded view of the business before you take the plunge.
- Get the finance in place – irrespective of how you might be funding this business venture, make sure you keep to your budget and have any credit agreements in place so that you can act quickly. Lenders will no doubt want full details about the business you intend to buy together with three years’ accounts, financial projections and personal guarantees etc so make sure you have a full understanding of what’s required and don’t stumble at this last hurdle.
- Negotiate – most things in business are negotiable so it’s always worth trying to strike a deal as long as its realistic and doesn’t sour relationships. Usually, the current owner has a perfectly good reason for selling-up such as retiring for example, and by the same token, they don’t want to drag things out. If you have all the money upfront you are in a very strong position as a buyer and this will give you some wriggle room on the price you pay.
- Due Diligence – Before you sign the dotted line, make sure you and your solicitor have done all the necessary due diligence on the purchase and as long as everything stacks up, make the deal and buy the business!
Now this is where the real fun starts…