Buying a Business
Why do I want to buy a business?
- To earn a living
- To supplement other income
- To create an investment
- To work for myself
What type of business do I want?
Am I in a position to compile a shortlist of options or would I benefit from consulting a business agent?
The following points may influence your shortlist:
- Is this type of business realistically affordable?
- Will it maintain my interest over time?
- Will my family give me their support?
- How much of my time will the business occupy?
- For how long will I be financially committed?
- Will the business provide the income I require?
- Do I have sufficient knowledge or do I need to learn more?
- Make sure that your interests are in line with your capabilities
How much capital is needed?
Enough capital for the following:
- To buy a leasehold or freehold premises
- To buy the going concern and its stock
- To cover all professional costs incurred including: solicitors, accountants and survey/valuation costs
- Sufficient working capital (enough money to live on, cover my initial overheads and replace stock as I build the business)
Do I need to raise additional funds?
There are several fund generating options:
- Re-mortgaging my house
- Selling my house
- Obtaining a bank, building society or finance house mortgage/loan
- A good business agent should be in a position to provide you with sound financial advice and access to good sources of funds.
Do I need to live on the premises?
This will be dependent upon:
- My financial position
- The nature of the business I am considering
- My personal preferences
Shall I buy leasehold or freehold?
Most businesses operate from either leasehold or freehold premises, which may or may not have accommodation attached.
Your accountant will assess the value of the business by separating it from the value of
the leasehold or freehold.
A surveyor will place a value on the property.
How do I go about a finding the business I would be interested in viewing?
You will save yourself a lot of time and energy by:
- Reading the trade press and Dalton’s Weekly where most reputable business agents advertise.
- Visiting the EM&F website, for full listings of all businesses available from the EMF Group
A good agent will establish: the geographical area and the type of business you are
interested in buying, your accommodation
requirements (if any), the finance options available to you.
He will then be in a position to supply you with details relevant to your specific areas of
interests, avoiding wasted time and
expense on unsuitable propositions.
What are the key steps to be taken in viewing a prospective business?
- Make an appointment through the agent
- Prepare in advance of your visit the questions you would like answered
- Be discreet – the vendor may not want his staff or customers to be aware that he is in the market to sell his business
- Take notes during your visit (or immediately afterwards). Summarise your general impressions and feelings after you leave.
- Communicate your conclusions to your agent, even if they are negative. It will enable them to obtain a clearer picture of your requirements
What do I do once I have become seriously interested in a business?
- Request accounting information and once received consult your accountant who will then be able to advise you on the advantages and disadvantages of buying the business from a financial viewpoint.
- Make a formal offer through the business agent first by telephone and then in
writing. Head your letter ‘Subject to contract’.
Make sure you include that phrase in all subsequent written communications.
What action is needed to complete the purchase?
- Once you have come to an agreement to purchase you will need to:
Retain a reputable firm of commercial solicitors to assess the legal implications.
- conduct a search at the local planning office and the land registry office
- check all relevant licences, consents and the like
Retain a reputable commercial surveyor to conduct a survey and valuation. If a
mortgage or loan is involved the
finance house, building society, or bank will insist upon their own full survey and valuation at your expense.
Providing that you still intend to buy, we would now recommend that the
vendor and yourself undertake to share the
cost of an independent stock valuation. A good agent will be able to arrange this for you.
Am I now in a position to complete?
Prior to completing you should (if possible) negotiate an overlap period with the
This should be long enough to enable you to become fully familiar with:
- The business
- Its practices
- Its customers and suppliers
Selling a Business
How much is my business worth?
This will depend upon many different factors including:
The location of the business, the condition of the premises, the value of the Freehold or lease, the extent and condition of the trading equipment, the profitability of the business, the demand for the type of business, the availability and cost of finance.
A good Business Agent is in close touch with potential purchasers and the market. He will be in a good position to help you value your business. Your accountant’s advice will also be of benefit.
What do I look for in choosing a business transfer agent?
In order to ensure that you get a satisfactory and objective valuation, together with an effective sales service, it is essential to choose your Business Transfer Agent with care.
These are some of the key points to bear in mind.
- How long have they been established?
- Are they totally independent?
- Do they have experienced and competent personnel at all levels?
- Do they provide a national network of offices?
- Do they ask prospective buyers relevant financial questions to ensure that the funds are available to buy the business?
- Can they introduce good sources of finance?
- Have they got the expertise to value businesses and stock?
- Have they got a successful track record in selling your type of business?
- Do they advertise extensively on a national basis?
- In the relevant trade magazines and do they have a web-site facility?
What should I expect from my business agent?
A good Business Agent should be in a position to:
- Value the business and property
- Draw up a prospectus
- Advertise your business nationally and locally as appropriate
- Handle enquiries and assess their quality
- Send full details
- Arrange appointments to view
- Brief you on the prospective buyer
- Follow-up after the visit to establish the level of interest and provide further
- Information where required
- Maintain regular contact right through to completion of the sale
- Assist the purchaser with finance (if required)
What can I do to speed up the sale of my Business?
Ensure that all the accounts relating to the business are up-to-date
- Ensure that copies of the terms of your lease are available
- Ensure that your business is presented in its most favourable light
- If stock valuation is going to be necessary, it may simplify matters if you do your own stock-take first to
give yourself a value to compare against the stock valuer's assessment
Are there any key points that I should be aware of in dealing with prospective buyers?
When you have an appointment with a prospective buyer to view your business;
- If you want to keep this matter confidential, be sure to make the prospective buyer aware of the fact
- Make sure to attend the appointment personally. The prospective buyer will want to make an assessment of both the business and its current owner.
- Allocate sufficient time to allow the prospective buyer to view at their own pace
- Allow for the fact that you may have to discuss the business in layman's terms
- Communicate the outcome of the appointment to your Agents. This will enable them to follow-up efficiently on your behalf.
What should I do when someone displays a serious interest?
- Advise your Agents immediately so that they can keep in touch with the prospective purchaser
- A good Agent will run a second check to ensure as far as possible that the prospective buyer's financial position has not changed
- Agree as to how the stock-taking, legal and professional costs are to be split
- Negotiate the terms of a phased take-over (if required)
- Establish a time-table for transfer and completion
- Formally complete the contract to purchase
What if my intention is to buy another business with the profits from the sale?
Timing is crucial from both a financial and a continuity of trading view point. A good
Business Agent will work with you to try to ensure that you do not lose either your
prospective purchaser or the business you wish to purchase. Your accountant will advise
you on the tax implications of your plans.
What if problems arise?
Whilst many transactions run smoothly, problems can and do arise. The secret is not to panic - just contact your Business Transfer Agent. A long established Business Agent will have seen most problems before and will be able to advise how to overcome them.
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