Acquiring an ‘off the shelf’ business can offer a number of advantages, whether this be for experienced entrepreneurs or someone who’s just stepped into the world of business.
If you already have an established business, purchasing a second company allows you to launch into new markets and your operations are able to grow with new innovations, machinery and skilled workers. There are also businesses that can be purchased where profits can be generated straight away with minimal work.
Whilst buying a business is for the most part advantageous, just like anything it doesn’t come without its risks, so here are a few tips to consider that might help the process easier.
Does the business suit your goals?
Don’t buy a business just for the sake of it, make sure that the business you’re interested in is aligned with your objectives. Have a close look at these factors to ponder:
- Debts and obligations
- Property and asset ownership
- Cashflow or sales revenue
- Rights to intellectual property or patents
- Existing management teams and staff
- Ability to be relocated if required
Make sure sufficient finance is accessible
Making sure you have adequate funding available to you is imperative when you have agreed on the basic terms of the sale, as there are not many business owners who fund the transaction entirely out of their own pocket or their business’.
Alternatively, the buyer will obtain a loan or investment that will allow them to access the funds required. This process tends to take some time as the lender/investor will need to approve of the investment in the new business, and you will be required to provide information about your financial position and the health of the business in question so they know whether or not their money will be at risk.
In conclusion make sure you’re aware of how long this can take and to factor this into your transaction timeline.
Do your research!
Try not to jump in head first when you’re interested in a business, make sure you carry out plenty of due diligence by doing a thorough assessment of the business. Delve into the previous accounts, the list of suppliers, list of debtors and lenders etc.
Make sure you obtain as much information as you can, so you are fully informed of what shape the business is in so you are aware of any risks before you make your approach.
Honesty is key
The buyer and seller are both at risk during this kind of transaction, so try and be as open and transparent as possible, as this honesty then tends to be reciprocated. Trust is crucial for a smooth transaction and often ends with both happy parties!
Create a Heads of Terms Agreement
To show your seriousness in purchasing a business, drawing up a ‘Heads of Terms Agreement’ can show sellers you mean business. This agreement usually shows the points that have been agreed in principle between both parties during the course of negotiations, and is a great step to setting out the goals of each party.
You’re not obligated to buy, you can walk away!
If you’ve come to the decision that the business or the deal isn’t right for you after all, or you’ve found something out that’s a bit too risky for your liking, don’t feel obligated to carry on with the transaction. Up until the point of a final contract being signed and the funds being transferred, you can walk away from the deal, or even renegotiate.
Don’t hesitate to ask for help
If you’re new to buying businesses, put your trust in experts. BK Plus will help you through the whole process and will ensure you’re getting the best deal possible.
If you’re considering buying a business, get in touch with our professionals at firstname.lastname@example.org