With 500,000 businesses believed to change hands every year, you may be curious as to why?
Avanti work with businesses across multiple sectors and see businesses change hands for many different reasons. The truth is, it is not always a failing business that sells.
A business sale can be triggered by a change to personal circumstances such as retirement, illness, and lifestyle. It can be due to a more sinister reason such as a fundamental problem within the business itself.
How Do You Spot A Golden Goose From A Total Turkey?
First on your checklist is finding out exactly why a business owner wants to sell, what has changed?
As part of your due diligence, you should ask the business owner what their challenges have been, what steps they have taken to solve them, and why those steps have not worked.
Are you the person to provide the solutions?
Potential Pitfalls
- A flawed business plan – perhaps there is a supply and demand imbalance.
- The business is outdated – the competitors could have advanced in their use of technology or the market could have fundamentally changed.
- Is the business in debt – and could this have harmed your potential supply chain?
- The equipment used is outdated, this could be costly to replace and cause delays to your day to day operations.
How Can You Uncover These Pitfalls?
You will spend time completing research, use this opportunity to flag concerns, and understand future challenges, opportunities and how you may plan for them.
The business owner is on hand to give you information, but remember it will have a natural bias, after growing it from day one, they will be unlikely to see the negatives. To give balance, you should also speak with existing customers and employees (if possible), and the local business community.
The Financials
You should ensure that you have a good accountant by your side to examine the financial position of the business
What should you be looking at?
- Tax returns
- Balance sheets
- Marketing fees
- Accounts receivable and accounts payable
- Debt
Remember, a business that is not showing huge profit is not necessarily a bad investment…steady growth and income streams on a road to profitability are often the better option – think about the Tortoise and the Hare.
You should use your research as collated data to create a broad picture of the business proposition.
Ask yourself does the opportunity tick the boxes when it comes to your business goals, resources, time scales and above all budget?
When you’re content that your questions have been answered, you can proceed, read our guide to buying a business for handy hints and tips to help move you and your business forward.
Whether you’re wanting a business valuation, advice on the viability of a purchase or you need the accounts completed to secure funding, Avanti(08000) 388 799 are in your corner. Modern accountants with traditional values.