Advice:Buying a business

By , published on 26th July 2011

So you fancy a present for yourself? – there’s lots on offer out there, but if you’re thinking about running your own business, buying a company that’s already established may be a lot less work than starting from scratch. Like everything though there are advantages and disadvantages to consider.

Advantages:

  1. Some of the ground work will already have been done in getting the business up and running.
  2. It may be easier for you to get finance as the business will have a proven track record.
  3. A market for the product or service will have already been demonstrated.
  4. Existing employees should have experience you can draw on.

Disadvantages:

  1. You often need to invest a large amount up front and will also have to budget for professional fees for solicitors, accountants etc.
  2. If the business has been neglected you may need to invest a lot more money on top of the purchase price to give it a good chance of success.
  3. You will need to honour or renegotiate any outstanding contracts the previous owner leaves in place.
  4. There could be hidden staff problems –eg low morale.

If you have made the decision to buy a business, make sure your choice of business fits your own skills, lifestyle and aspirations in the same way as if you were starting your own business.

The valuation of the business or the purchase price is usually the most difficult area and where you will undoubtedly need to take professional advice – from your Accountant or Business adviser.

If you decide to make an offer and agree a price with the seller, a period of time is allowed for you to verify that all of the information you have been told is accurate. This is known as Due Diligence and is usually undertaken by your accountant/solicitor. This takes approximately 3-4 weeks to complete.

Assuming all is well, you will then need to your enlist your solicitor to draw up the legal agreements and purchase contract.

Need help in deciding on the right business for you? Then call me at Janette Whitney & Associates on 01403 733671 for professional, impartial advice & solutions

< See all advice

Janette Whitney

About Janette Whitney

Janette Whitney is an award-winning business consultant, media columnist and award-winning business author. She specialises in business growth strategies and finance and formed her consultancy business after a highly successful career in banking. Janette’s expertise has won her both national and regional awards which include ‘Consultant of the year’ and ‘Business Book of the Year’ award (as co-author of ‘The Essential Business Guide’).

Post a new comment