Buying a business can be a sound and rewarding investment, if you do your homework right. That’s the message from Dyke Yaxley’s Mark Bramall.
“Many people who want to run their own company find it easier to take over an existing enterprise, and it can have some significant advantages,” he said.
“If you have the funds up front to pay the purchase price, buying an existing business eliminates the time and stress in getting a brand new venture established. It can also be easier to secure finance for an existing company, because it will have a track record.”
But he added: “Finding profitable businesses for sale at reasonable prices can be difficult, as business owners are often overly optimistic with regard to the market value. And as the business concept, customer base, brands and other fundamental work are already established, the financial costs of acquiring an existing business are usually greater than starting one from nothing.”
Mark said: “Good research and professional advice are essential. If you are interested in seeing what is out there, check out business sale agents, the trade media, or any number of online agencies. Professional advisers can also carry out specific searches if you know what you’re looking for. Before you register with an agency, though, make sure you have established the cost. Not all agencies are free to join, even if you are a purchaser.”
Mark also flagged up some of the common mistakes which potential buyers tended to make.
“People must not buy a business which does not fit in with their capabilities, or their existing business – they need the experience and inside knowledge to ensure they are making the right decisions. Nor should they buy without proper due diligence, or a contract in place.
“It’s important to be clear on the role of the vendor in the business too and the effect taking them out of the equation may have as often they are key to the sales process and can be hard to replace.
“Find out why a business is for sale, ask about profit track records in recent years and the forecasts going forward, and consider what the likely market potential will be in the short to medium term.”
Dyke Yaxley’s Mark Bramall