There are numerous benefits to buying an existing business. Firstly, you have the staff and the resources in place who are already operating. There’s a ready made customer base and a product or service to sell. There may also be the potential to expand either through opening new offices or stores or entering a franchise arrangement.
On the downside, buying a business is generally more expensive than starting one from scratch where you can control your budget and grow at a pace that suits you. What might seem like a good prospect in the first instance can turn out to have too many problems lying under the surface that will cost you more time and money.
But, if you are going to buy a business, how should you prepare yourself to take it over and improve your chances of success?
Is It a Good Match?
The first thing you need to do is find a business that matches you – not only your skills and knowledge but also your own personal philosophy. Another issue is going to be the geographical location, whether the company is in one place or has offices in different parts of the country, perhaps even around the world, and how that fits with your circumstances.
You are going to have to decide whether you’ll go to a company direct and make an offer or you go through a business broker. A broker can screen certain businesses for you and, hopefully, find a better match not only for your budget but in line with your values and beliefs. They can also help with getting the right due diligence measures in place.
Putting Together a Top Team
If you are interested in an acquisition, the next step is to get the right team together that can help you move forward. This will include people like your bank, your accountant and a solicitor. Performing your own due diligence and making sure you have all the relevant information you require to make an informed decision is vital. That will not only include looking at the books but also checking out the company’s reputation, perhaps talking to customers and going to meet suppliers, and whether there are any underlying problems that have to be considered.
The Company Prospects
Of course, at the heart of all this is the performance of the company. What kind of revenue is it earning? What are the outgoings? What is the scope for expanding the business, either by investing in new offices or going down the franchise route?
One thing that many buyers don’t factor in is what impact the current business owner has. What happens when they are no longer there? Will customers who valued his or her presence at the helm of the company be likely to look elsewhere or try to find a better deal? How are the current staff going to feel about a new owner? And what restrictions are going to be in place should you wish to bring in your own team?
At the top your list is also going to be how you drive the business forward and what prospects lie ahead. While you may have had these in mind from the start, once you get into the detail of the transactions, these can change drastically as you learn more about the company itself.
Preparing to buy a business is not a simple matter of getting out your cheque book and taking over. There are a multitude of issues to consider and decisions to get right which can impact on the final cost. Having the right team of advisors and support in place is key to success. Knowing what you really want is absolutely vital.