I would suggest that you ask yourself some questions before you buy a business. I don’t mean the obvious questions about your intended acquisition. It is important that during the due diligence phase of the purchase you make sure that you investigate all aspects of the business to make sure there are no unseen boobytraps but I am referring to the initial decision-making process before the purchase.
There are four key questions, which may not immediately come to mind but I think you should consider.
1) Should I start up a business or buy an existing one?
This is a fairly clear-cut question but to get to the answer needs some work. If you have an idea for something new there is no choice to be made, but if you are venturing into an existing area then you need to calculate the options. On one side, starting fresh means you get to create something in the shape you want. You will face an initial investment as you get ready to trade then build sales. New businesses typically lose money in the first year, break even in year two and turn a profit in year three. On the other side if you buy an existing business you will probably pay more but achieve profits in year one. Work through the numbers you might find that buying a going concern is cheaper.
2) Do I have the necessary skills?
Look at the business and decide the role that you will play, then make a list of the skills you will need to perform that role, don’t panic if you fall short. If you are going to buy a newsagents you will need an excellent grasp of numbers as margins are critical, you will need social skills if you are going to interact with customers and management skills if you have staff. It is important to recognise your strengths and weaknesses and address any shortfall. If you lack management skills a short course may be enough to get you started.
3) Does the business suit me?
I have seen several businesses fail, not because of some change in fashion or even illness but because the owners did not realise what they were taking on. You may like the idea of running a restaurant / café or owning a cleaning business and even have then skills involved but have you considered the commitment. Running your own business can be very rewarding, you answer to no one and success feels great, but in the early years, it can be many hours of hard work with small reward. If you like what you do it is much easier find the energy and courage required.
4) Can you add value?
Business is not a static environment. Whether you buy a business or start from fresh it is important to continually look for ways to add value. You cannot simply expect to buy a business and expect it to generate cash year after year. When you buy a business you should have a clear vision of how to improve it, then as time goes on take a back step and look again to see if you need to make changes. If you cannot add value then you should consider getting out because your competitors will gradually erode your position.
Once you’re suitably happy with the answers to the questions above and assured that you’re in the right position to move ahead with an acquisition you can choose a Business Partnership to expertly guide you through the process. Business Partnership has a long history of matching sellers and buyers of UK business. Our extensive experience means we are equipped to help you make the sale of your business as simple as possible. To take the first steps, get in touch with us today on 0870 444 0 555.