Buying a business doesn’t have to be an arduous task. If you know what you’re looking for, you can get the right answers to your questions to make a well-informed and profitable decision.
When you are looking to buying a business, there are a few details that are overlooked during initial purchase discussions that come as quite a shock further down the line. By hammering out the small print as early as possible, you can reduce the number of negotiations you have, in turn minimising the documentation drafts you need. In the long run, this can save a substantial amount of capital you would have otherwise spent on legal fees.
To help you with your purchase, here are the four vital areas to evaluate when you are looking to buying a business.
Have you clarified if you are merely buying the business or its assets too? When looking to purchase you want to make sure you are also buying the assets. This could mean any physical assets such as any employees, trading stock, property, land, or machinery as well as intangible assets and intellectual property.
During negotiating you have the luxury of cherry-picking the assets that you wish to acquire. There is, of course, the added tax bonuses. By buying the assets, you only pay tax on what you paid, not what the soon-to-be previous owner would have paid at the original point of purchase.
It is a good idea to find out what the deal is on any properties you are taking over. If the properties are currently leased, it is vital that you establish the terms of the current contract. How long is left on the lease? What will happen to the price after the tenancy expires? It might be worth speaking with the landlord to discuss a new deal so that your rates are fixed for the next decade or so. You will also need to make sure they are comfortable maintaining the contract under new ownership. Another factor to consider is the security deposit. Often the seller is expecting you to buy them out of this, so make sure you cover all your bases first before doing so.
Prepaid ongoing expenses
Social media accounts, hosting, PPC, marketing, IT services, internet service etc all come with a subscription. Some business owners opt to pay for these services in advance and so when it comes to changing hands, the seller will want the deficit reimbursed. In most cases, this is perfectly acceptable, and pending review, the services are most likely beneficial for you and your soon-to-be new business. However, it is common for these additional extras to be excluded from the initial agreed-upon purchase price and snuck in at the point of closing. Asking the right questions in the first instance can ensure there are no nasty surprises at the end. Plus it gives ample time for reporting to be provided so you can see the benefits of what you’re buying into.
Who are the employees?
As with most businesses, employees are the lifeblood of the organisation. They are on the front line and know the ins and outs of the internal systems and processes, as well as being the vital components in your business-customer relationships.
The concept of a business changing ownership can strike fear into the minds of current employees. Especially when it comes to job security. It is vital to give them the peace of mind that by the time of taking over, their jobs – if they are – are completely safe, but more importantly, you need to make sure that the team are the right people for the job. Is there a thriving, desirable environment in the office with performers that have a vested interest in the success of the company? Or will keeping on the workforce leave you with a team of dead weight? By taking the time to get to know the employees, you’ll get a better understanding of who you are buying into. It is also a good idea to maintain a healthy relationship with the seller during the transitional stages too: at least until you are comfortable with the books and smooth running of the organisation.
There are a number of elements within a business you want to look for to make a profitable decision. If you’re looking to buy a business, we have hundreds of existing businesses for sale right now. Coupled with our accurate and up-to-date advice and service, we can help you make the right choice. You’ll find a complete listing of our businesses for sale here.