Whether it’s small or large-scale, buying any kind of business marks a significant step in your occupational life, and so the process needs to be handled as efficiently as possible.
Before you buy a business, there are various tasks that you have to undertake, and these range from the likes of goal-setting, researching and negotiating. With this in mind, this handy guide that details the top tips for buying a business in the UK. If you’re about to make such a transaction, continue reading!
Setting your goals
Regardless of whether you’ve bought a business before or not, it’s vital to set clear and realistic goals for when you do purchase it. With this in mind, ask yourself why you are looking to buy a business in the first place. Are you looking to scale up and add value to this business so that you can sell in the future? Or are you simply looking for something to generate additional income?
It’s all in the research
When it comes to identifying a business you’d like to purchase, you’ll need to weigh up the pros and cons of each. With this in mind, it’s best to narrow down your search by sector and consider factors such as the best time to buy. Then, once your ready, shortlist two or three business to go for.
Organising an initial viewing
The initial viewing of the business you wish to buy is just as important as any house viewing, especially when you’re looking to buy a small business. Like in a house viewing, it’s important to have an open mind and evaluate both the good and the bad. Record key findings and ask yourself what this certain business can offer you. However, it’s also vital to be discreet as some business owners may not want staff to know that they are selling. Complying with the seller’s wishes will establish a friendly and professional relationship from the get-go.
Getting your finances in order
When it comes to looking for a business to buy, you should have a realistic budget in mind. However, before getting in touch with any vendor, it is important to have a general agreement of credit in place. The next step then is to get this credit formalised. It is important to note that lenders generally require:
- Details of the business/sales particulars
- Details of personal assets and liabilities
- Accounts for the last three years
- Final projections (if no accounts are available)
If you are struggling to secure a bank loan, there are other sources of finance that you could consider. These include your pension fund, or perhaps financing from friends and family.
Making an offer
As a general rule of thumb, purchasers are advised to make their first offer by phone and then follow this up immediately in writing. It is also vital to use the term ‘subject to contract’ in all communication. As well as this, it is important to ensure that the existing owner stays within the business for a set period during the handover.
This is where your communication skills come in. If you have a targeted offer in mind, don’t be afraid to push for it. At this stage of the buying process, you and your solicitor will go through a process called ‘due diligence’, which refers to the verification of information given by the seller. Furthermore, before completing the overall sale, try to also negotiate an ‘overlap period’ to ensure you have time to become familiar with the business before taking ownership of it.
Do I need a financial advisor or accountant?
To seal the deal, you might want to seek the help of an expert to guide you through the process of buying a business – such as a business growth accountant. Not only can they help you with your initial finances and costings, but a great business growth advisor can advise you for years to come. Whether you’re after strategic advice or need to make sure that you’re doing everything right, getting an advisor/accountant is imperative when buying a business.