Buying a business can be exciting and daunting in equal measure – especially for new entrepreneurs. On the one hand, you can’t wait to get started. But, on the other hand, this is your money and your future that you are risking. You don’t want to rush, miss something, and realise too late that you never kicked the tyres before you drove off the lot! This checklist is here to help – 25 of the most important points to consider as you are buying a business.
1.Confirm why the owner is selling up: Is it because their circumstances have changed, they’re retiring or they want to cash out? Or are there hidden problems with the business?
2. Know exactly what you are buying: Is this a stand-alone business or a franchise? What is its legal entity. Is it a business that relies on new customers or repeat revenues?
3. Review the state of any relevant buildings involved: If the business trades from commercial property, find out the state of the building. What improvements might you need to make?
4. Understand any liabilities: As the new owner, you’ll take on many of the responsibilities that someone else has signed up for. Know what these are.
5. Review the record so far – successes: Is there room to improve on past performance, or has the business maxed out its opportunity in the area?
6. Review the record so far – failures: ask the owner what they’d do differently if they were starting all over again. It will help ensure you don’t make the same mistakes.
7. Dig into the business’ reputation: Spend a few evenings looking at online reviews, speak to other businesses and ask around the local area if you can.
8.Discover any disputes: Is the business facing any legal fights? Are there any ongoing complaints with customers, staff or suppliers?
9. Check out the competition: Spend time researching the business you are buying. And take a look at anyone else that operates in the sector, especially local competition.
10. Size up the staff: You may have several staffing obligations when taking over a trading entity. It’s important to know what these are.
11. Consider the customer base: Understand the marketplace and how the business you’re buying is positioned. Can you improve its trade, or are there any threats?
12. Recognise why the business is working: what are its Unique Selling Points, and will these still be relevant when you’re at the helm?
13. Make sure you can replicate what is working: Can you continue what the previous owner has achieved? Are they the magic ingredient in the business? And, if so, can you be the same ingredient?
14. Compare your skills with what’s required in running the business: What are you good at, and where do you struggle. Determine whether the business fits you.
15. Ask people you trust whether what they think about the business: to balance your excitement, you need some impartial advice when taking on such a commitment.
16. Ask them whether the business is right for you: listen to them too; it could be the best advice you’ve heard. Be honest with yourself to prevent a costly mistake.
17. Put together a business plan: there are plenty of templates to be found online, or you could ask for help from a financial advisor or your accountant.
18. Finagle the finances: it’s not just the business purchase that you have to take into account, but also working capital to maintain trade.
19. Prepare for the worst: always err on the side of caution, and it can be prudent to have some contingency set aside for unexpected bills or quiet periods.
20. Make sure your personal life fits into the new venture: as well as making sure you can feed your business, you need to ensure you can afford to live and eat too!
21. Make an offer: aim low to begin with. The owner will be prepared for it. But have a reason for making the offer, and offer conditions to speed up a sale.
22. Enter into negotiations: the seller wants the best deal for them and, as the buyer, you want the best for you. You can find some great negotiation tips here.
23. Get a solicitor and accountant: you’ll need to engage these professional’s services when conducting due diligence and, if successful, concluding the sale.
24. Do your due diligence: take your time to establish all the company’s assets and liabilities, pore over its records and those at HMRC and Companies House.
25. Establish your training and handover period: get this noted in the sale documents and make sure the seller is committed to training and supporting you.
And a bonus 26 – pick out a nice keychain, for the keys to your brand new business!
Enjoy this checklist for buying a business? Get ready for the negotiation process with our guide here >>>
