Buying a business can be exciting and daunting in equal measure – especially for first timers. On one hand, you can’t wait to get started – for most, this is the culmination of a lifelong dream. But, it’s also your money and your future that you are putting on the table. You need to be confident you’ve dotted all the I’s and crossed all the Ts, before you pick up the keys for your new life in business.
Don’t panic – we at Daltons have guided thousands of entrepreneurs just like you, and have compiled these twenty questions to get you ready. Treat this as a checklist – getting an answer to each of these will help you tick off the most important points to consider as you buy a business.
What Are You Buying?
1. What exactly are you 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?
2. What liabilities will you be signing up for? As the new owner, you’ll take on many of the responsibilities that someone else has signed up for. Know what these are.
3. What reputation does the business have? Spend a few evenings looking at online reviews, speak to other businesses and ask around the local area if you can.
4. Are there any disputes? Is the business facing any legal fights? Are there any ongoing complaints with customers, staff or suppliers?
Why are they Selling?
5. Why is the owner 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?
6. What has the previous owner achieved? Is there room to improve on past performance, or has the business maxed out its opportunity in the area?
7. What mistakes have they made? 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.
8. Can you replicate what the previous owner has achieved? Are they the magic ingredient in the business? And, if so, can you be the same ingredient?
How is it Operating?
9. Are the premises in good order? If the business trades from commercial property, find out the state of the building. What improvements might you need to make?
10. Who is 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.
11. What employment contracts are in place? You may have several staffing obligations when taking over a trading entity. It’s important to know what these are.
12. Who will your customers be? Understand the marketplace and how the business you’re buying is positioned. Can you improve its trade, or are there any threats?
13. Why do they buy from this business at the moment? What are its Unique Selling Points, and will these still be relevant when you’re at the helm?
Why are you Buying it?
14. Do you have the right skills for this business?. What are you good at, and where do you struggle. Determine whether the business fits you.
15. What do people you trust think about the business? To balance your excitement, you need some impartial advice when taking on such a commitment.
16. Do they think 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. Do you have 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. How are you going to finance the business? It’s not just the business purchase that you have to take into account, but also working capital to maintain trade.
19. What have you set aside as a contingency? Always err on the side of caution, and it can be prudent to have some money set aside for unexpected bills or quiet periods.
20. Can you live and pay all your personal bills too? As well as making sure you can feed your business, you need to ensure you can afford to live and eat too!
Buying a business is a significant commitment, but if you can answer the above questions and still want to proceed – congratulations! It’s time to enter the next stage and negotiate your purchase. Thankfully, we’re here to help with that too. Check out our negotiations guide to get started.
