If you’re looking for a biz opp or an extra income stream then the usual solution is to start up a new business opportunity from scratch. However, another option can be to buy a ready made business. Here are some tips and advice if you’re interested in buying a ready made business.
Before buying a business you should...
Research the industry carefully. Once you’ve decided what sort of business you’re interested in research the industry carefully. Is it an expanding industry, or declining? What are the future prospects for it? Do other businesses in the same industry seem to be doing well… or are they struggling?
Find businesses for sale. The usual (and easiest) way to find a small business for sale is to go to a business transfer agent. Business transfer agents are just like estate agents, but for businesses. Most business transfer agents have anything from a handful to a few hundred businesses up for sale at any one time.
The services of a business transfer agent are FREE to buyers. But remember they are working for the seller not for you, so their advice won’t be impartial.
Do careful research. If the business is a local business, such as a shop, do your research into the local area to see what’s going on there that might affect the business. Is there a planning application for a new supermarket? Are parking restrictions being brought in? Is there a new housing development or business-park planned which might bring in more customers?
Get the accounts. If you’re seriously considering buying a business then the seller should be happy for you to see the last few years’ accounts. Look at how the takings and the profits have risen or fallen over the last few years.
If you aren’t used to reading accounts have an independent accountant appraise them for you, and tell you exactly where the business stands.
Check exactly what’s included. Does the business own the premises it occupies (if any) or are they rented? Does it own any equipment, machinery or vehicles it uses, or are they just leased – and what will it cost to take over the leases?
Are the key staff staying on after the sale? If the owner is one of the key staff chances are they won’t be staying on without a separate agreement being made - you’ll need to allow for this.
Get an accurate valuation. Make sure that the asking price for the business is fair. Typically, businesses are valued at between one and three times the annual profit. But that’s only a very, very approximate guide and it depends on the type of business/industry, the business’s standing and prospects, and also how many other people (if any) are interested in buying the business.
If in doubt get an independent account, surveyor or valuer who’s experienced in business sales to advise you on a reasonable market value for the business, together with what might be an appropriate opening offer to make should you want to buy.
Make an offer. Businesses rarely sell for asking price and the price will probably have been set on the basis that the seller will consider offers. So don’t be afraid to start low and negotiate.
Important to know: Whatever sale price is agreed will usually exclude the cost of any stock. You’ll will need to buy this on top at a fair trade valuation.
by Mark Hempshell
Business Opportunities Expert
Mark Hempshell is a regular contributor to What Really Makes Money. You can sign up for the free weekly eletter here:
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