Thinking of Buying a Business?
Buying a business is often a more attractive proposition than building an organisation from scratch. There is much less risk, especially if staff, equipment, suppliers and customers are all in place, giving you the opportunity to enjoy the benefits and rewards of business ownership from day one.
Of course there are still many risks and responsibilities and you will need to possess entrepreneurial spirit, motivation and determination to manage and improve your new business. You will also need to ensure that you choose the best business to suit your experience and long term objectives.
This article outlines some of Stirling's top tips on buying a business.
Acquisition Planning
An acquisition plan will improve your chances of finding the right investment for you. It should include business type, industry sector, location and size, but you also need to give consideration to the current performance of your target company. Do you want to take on the challenge of a struggling business with huge potential but high risk, or would you prefer a safer option? You should also include the amount & sources of available finance and a proposed timetable; you may even be asked for proof of funding, before any offer for a business is accepted. Once you have a clear idea of what you're looking for, you can start your search.
Finding the Right Business
Businesses that are for sale are usually advertised through intermediaries, such as Stirling, who would be happy to discuss your requirements in detail, to see if they have listings that may be of interest to you.
The intermediary will supply you with detailed information on a company's financial performance, position in the market, history, personnel, strengths, weaknesses, costs, assets and liabilities along with the owner's reason for selling.
What's it Worth?
You need to decide what the business is worth to you. What's the current operating profit? What level of salary are you hoping to achieve or accept? Are there opportunities for expansion and increased turnover? Is the level of risk reflected in the return on investment?
If you choose to buy a business via an intermediary such as
Stirling you have the peace of mind that we have valued the company to reflect all financial and commercial factors, but you also need to be sure that the price fits with the finances, risk levels and aspirations of your Acquisition Plan.
Buying your Business
Once a price and Heads of Terms has been agreed, you are entitled to a period of exclusivity, to allow time for the financial and legal status of the business to be reviewed. In addition to this process of due diligence, many other legal agreements, such as the preparation work for lease transfers need to be taken forward for when the sale is finalised. If the business is already successful, you might want to negotiate a handover period, whereby the seller is employed by you for a period of time, to ensure continuity.
Running a business can be extremely rewarding both personally and financially, but for most people it isn't an 'everyday' activity as it can become stressful if the right decisions are not made.
If you have any questions about buying a business, please contact Stirling for free impartial advice. We hope that you have found these tips on buying a business useful and wish you luck in your new venture!
About the author
Roger Smith is a Fellow Member of the Institute of Directors having been a member since 1982 and set up
Stirling Business Solutions as a Business Transfer Agent in 2001. This followed the sale of two of his own businesses in 1999 and 2000 (one an Asset Sale and the other a Share Sale) where the author gained valuable hands-on experience of the sale processes involved.
