Buying a Business? What to think about…

Business Valuation, Purchase, Exit & Sale,

Buying a business, whether for the first time or the tenth, is still complicated. Every purchase will present a different set of challenges, frustrations and circumstances.

Perhaps the most important characteristics you’ll need as you go through the process are patience and good negotiating skills!

You may be a willing buyer, but the seller must be willing to sell at a price you can afford, that you can agree the business is worth, and you’ll need to reach agreement on a wide range of subjects before the deal can be done.

Here are some of the areas that you’ll need to work through. As ever, if we can help in any way, please get in touch. We’ve been through the purchase and sale processes personally, and advised many clients as they’ve done the same so can advise fully, and empathise fully too!

  1. How does the new business fit with any current business?
  2. If you don’t have another business, how does this new one fit with your skill set? Do you have the experience necessary to take it over and make it a successful venture? What gaps to do you need to fill and how will you do that?
  3. How soon does the seller want to complete? Can you arrange any necessary finance in that timescale?
  4. Will the seller support you, if needed, for a period of time after the completion, and if so, what remuneration will they want?
  5. Will the seller interfere after the sale completes? How will you manage that?
  6. Are there any synergies that you can take advantage of? Eg can your current team add something to the business you are purchasing or, if you’re taking over the team as well, will they enhance your existing business?
  7. Is there a way of modifying the business you’re buying to improve how it generates cash?
  8. Can you improve the prices charged by improving the service and the overall package?
  9. How can the deal be financed to be as suitable as possible for you? Would a smaller upfront payment be possible with performance related staged payments over time?
  10. Would a spread purchase price enable you to be able to pay the later amounts out of profit instead of capital?
  11. If you’re buying a limited company do you want to buy the business or the limited company as a whole? The implications for each are quite different for both you and the seller, who is likely to want to sell the limited company, while it may be better for you to buy the business without the limited company, avoiding any potential liabilities from the previous ownership period.
  12. Always ask the best lawyers you can afford to draw up the contract. If you economise on this you may end up paying far more later as not all matters may have been considered.
  13. The contract will have tax deeds and warranties that could be quite involved. Make sure your accountant is happy with these and that your accountant has adequate experience of reviewing these.
  14. Always check that what you’re getting what is being sold to you. This process is called ‘due diligence’ and covers a number of areas such as staff, contracts, taxes, accounting records, how the business was run and what records are available. In larger deals a lot of this information will be available when you express an interest.

This list is not exhaustive, and, as mentioned above, there will always be variables to any negotiations that you may not have foreseen. Do your best to be patient, keep a level head and ensure you have experienced advisors around you who understand your motives and the process.

Do get in touch if we can help at all, whether directly with the deal, or by suggesting commercial solicitors or other advisors. A purchase can be a very stressful time and often takes longer than you may have planned, but equally it can go through very easily and be almost painless. The difference usually comes from careful planning and having clear goals before you start.

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