Buying a business can be overwhelming. There’s a lot to think about and many aspects carry a huge weight.
Fortunately, your decision can be boiled down to a few fundamental concerns you should focus on when buying a business. With that in mind, we’ve covered a checklist of the top considerations when you’re looking for the right business.
Get a second opinion
This is partly linked to the idea of due diligence but be sure to source outside help. Seek the professional opinion of your solicitor and accountant who will be in charge of helping you with the sale.
Don’t just choose professional opinions, too. Ask your partner and friends what they think. By this stage you may already be too close to the business to be fully subjective, so people whose opinions you trust may be able to provide a fresh perspective.
There’s also no shame in sourcing the help of a business broker; someone to give you a solid second opinion and lend their considerable market insight to your decision. Brokers do this for a living, so don’t be afraid to reach out.
This is a big decision. No amount of information gathering will go amiss in this scenario and could very well reveal a perspective that you hadn’t considered.
Remember that a successful business purchase is one with no nasty surprises and a clear and demonstrated path to success.
If you have a passion for the field, can chart the business’ past successes and you’ve a second opinion that sees what you see, then you may just have a great opportunity on your hands. You can rest easy in the knowledge you’ve done all you can and your business should be off to a great start!
Ever seen a property development show where someone has just closed a deal before finding a massive crack in the foundations an inspector missed?
You don’t ever want to be in this position, so be sure to exercise your due diligence. Gather as much information about the business and the seller as possible. What are their reasons for selling? What are their annual operating costs? Request documentation that shows when the equipment was last checked or premises inspected.
Foster a good relationship with the seller but don’t be afraid to request these things. It’s well within your right to protect your investment and it’s possible the seller isn’t aware of any potential issues.
Ultimately, it’s your deal and your business to procure so be sure to do as much groundwork as possible with both the seller and the business itself.
If, as an example, you are hoping to buy a pub, you will also need to clearly understand the terms. Will you be buying leasehold, freehold or as a tenancy and how will this affect the way you dream your business going?
Appeal vs viability
One of the first things you need to do when choosing a business to buy is to weigh up your motivations. Do you want to make money or do you want to fulfil a dream?
Choosing a business to buy will require some degree of personal compromise from you. There is no ‘perfect’ opportunity. At some point, you’ll have to decide how much you are willing to invest in a dream versus a money-making venture.
As an example: perhaps you have always dreamed of running a movie rental business. You check the market and realise you have very few competitors. This would represent a gap in the market, right?
Not necessarily. It could simply be that the consumer demand simply isn’t there to support the market. Even though this particular business might be your dream, it wouldn’t be a particularly lucrative business opportunity.
On the flipside, there’s no point choosing a profitable business where you have zero passion for the industry. Even a potentially lucrative business will flounder if you are not invested in running it.
Consequently, it’s important your chosen business is one you can see yourself enjoying and is lucrative enough that it will take you far. It’s a balancing act. Exactly how much you favour one side or the other is entirely down to you.