Buying a business can appear to be an easy way to secure an income and enjoy the freedom of self-employment. However there are good and bad businesses for sale and sometimes certain types are not for you, or they’re simply not viable.
In this section, we plan to road test different business types so you can obtain the right information.
When buying an established business the following tips are very helpful:
1. Always have an accountant check the figures. They can very quickly tell you if they don’t add up.
2. Check the trading hours and if they’re long – say, seven days a week – there should be enough profit to afford staff. There’s nothing worse than buying a business in some great location only to find you’re working longer hours than you were before.
3. If stock is involved, always make sure it’s in good condition and not out-of-date or damaged.
4. If the business owns plant and equipment, make sure it’s also in good working order, is well maintained and not too old.
5. Make sure the business you want to buy is something you want to do. Don’t just buy it because it seems to be a good deal. Remember you do have to work in it and if it’s something that doesn’t really appeal to you, you’ll be stuck there for some time.
6. If you’re dealing with a large number of customers as in the case of retail, you need to be a people person. If you have a problem dealing with people, stay out businesses with high customer contact.
7. If the business is in a busy holiday location and you saw it at peak operation, remember that it may be busy during that time and very quiet the rest of the year.
8. Make sure you have a solicitor look at the lease. Some are extremely complex and there could be any number of tricky clauses that you don’t understand and that may trap you.
9. Make sure the lease is transferable and has some time to run with an option to renew. It would be very bad to buy a business with only six months on the lease and no option. That’s a very quick way to be out of business.
10. Check with the local council to see if there is any development planned for the site, or in the vicinity, which could be competitive.
11. Talk to other business operators in the area. Find out how trade is and what they think of the business you would like to purchase.
12. Avoid buying a business where there is too much competition or a price war going on.
13. Find out how long the business has been for sale. If it’s been on the market too long, there may be a problem.
14. Make sure you don’t pay too much for the business. Your accountant can you help to understand what a fair price is. Also be cautious if it appears too cheap; that too normally means there is a problem.
15. Check to make sure the owner doesn’t have more than one business. Sometimes the figures could include other business interests and the one you’re interested in may not be performing as well as it appears.
16. Be cautious about going into partnerships. Sometimes your best friends can become your worst enemies.
To find out ways to prevent running into business difficulty, as well as to know your options if and when you do, check out this website offering free information on a range of business related finance issues.