6 Tips for buying a business – Have you thought about being self employed and would like to buy something that is already making money? Here are our top tips for doing just that.
- The business numbers – You need to have or find yourself a trusted accountant. They will need to look over the financial statements for at least the last three years and see what profits the business is showing and the costs associated with the running of the business. Your accountant will look into all aspects so that you can see if it is a viable option for you to purchase.
- Existing Goodwill – As you good through the figures for the business a portion of these figures will be goodwill. Existing goodwill is the businesses good reputation and the customer base of the business. This is also the point where is will be a good idea to door some foot work around the local area and see what other people think about the business. Are there a lot of competitors or any there no competitors? A lack of competitors may see the business overvalued!
- Positive Cash Flow – This is the reason for purchasing an existing business in the first place and assuming the business has a storefront or website, social media presence etc. this should happen. Customer loyalty is something you need to have stay in place, so that the positive cash flow can then cover any borrowing costs associated with the purchase of the business initially.
- Existing Employees – Will you keep these employees and take advantage of their knowledge so that you can learn the ropes. A business like a beauty salon may have customers who are loyal to a particular staff member.
- Hidden issues – Any long-term debits, key supplier relationship issues, staff issues, and more. Perhaps a friend could mystery shop the business for you. Why is the business for sale in the first place?
Finally it is vital that you have a good gut feeling about the business and a good feeling about your ability to run the business that you are looking at. So take into account the 6 Tips for buying a business, as above and remember that you have the final choice to go ahead or not.
Why are you looking at purchasing an existing business? Why this types of business?
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