When you are buying an existing business, there can be lots of things to think about, which can feel a bit overwhelming. It is important to get your facts and information together when buying an existing business to ensure you are getting good value for money. Conducting adequate research prior to any exchange of contracts will ensure that you get a business that is worth what you are paying for it. `
Knowing What You Are Buying
How long has the business been actively trading for, and how long has it existed? If a business has only been trading for a couple of years, then ask questions to establish why it is for sale? If a quick sale is required, always ask further questions to establish why. Conducting research into the business you are looking at will ensure that you are happy with the decision you are making.
Cashflow – Is the Business Profitable?
It is essential that you look at how much a business is making. Is the business profitable? Has it ever been profitable? If not, does it have the potential to be profitable? Looking at the facts and figures for an existing business is important as you want to ensure that what you are putting your cash into has potential. If the cash flow is not good, look at it from another point and always consider if bad management were to blame. If a business has a large customer base and a good turnover, then why is cash not flowing and profit not being made.
What is the Reputation of the Business?
Does the business you are interested in have a good name and reputation? What do online reviews say, and what do current and previous customers have to say? If a business has a good reputation, then what plans will you have in place to ensure you maintain this reputation when you take over? How will you ensure levels of service and consistency are retained through a period of change? Similarly, if the business’s reputation is less than glowing, how bad is it? Can it be redeemed with a fresh and focused marketing plan, or is it too far gone that it would need a complete rebrand? Knowing what reputation you are buying is essential as you do not want to focus on building a reputation up from scratch and getting to grips with running a new business.
Running and Operating Hours
Does the business run at hours that you can accommodate, or do you need to get extra employees into work the hours you cannot commit to? Remember that you have other life commitments to honor, so try not to take on too much. Is there potential to increase the businesses operating hours in the future, and if the business is open longer, will it have increased earning potential or not?
Existing Customers and Clients
What customers or clients does the business currently have, and will these come over with the business when you take over. Customer loyalty is important, and to ensure that customers and clients stay with the business, they will need to be kept happy and fulfilled. It is also important to check customer data and records. Some business owners are not completely honest when they sell a business, and they can inflate or alter data to make it look more appealing, so make sure you check customer data to ensure that you are happy with the data you are seeing. If you have any doubts, then do not hesitate to get the information checked and verified by another separate third party.
Looking at the Employees
What employees does the business currently have? Are they full-time, contract, or part-time? Are all employees staying on with the business under new ownership, or are some looking at pastures new? It is important to know what staffing levels and numbers you should be expecting as there is nothing worse than coming to open or relaunch a business only to find that half of the staff have disappeared along the way. Ensure that all employees are happy and ensure that they are fulfilled within their jobs and roles. If an employee is disgruntled or if they have been unfairly treated, they may well cause damage to the business and brand.
Always get specialist employee advice and guidance from Brown and Crouppen St Louis before tackling any workplace situations or issues as small problems with one or two employees could quickly escalate, and before you know it, you may be left with no staff at your business or with staff who are so miserable and down that they actually drive away the customers and clients.
Is There Any Outstanding Finance?
Does the business have any finance attached to it, and if it does, what happens to this outstanding finance at the transfer of ownership? For example, does any outstanding debt with suppliers stay with the business or pass on to the old owner (the one who took the debt)? Getting to grips with the financials is essentials as the last thing you want to do is take on huge amounts of debt that you may have to start paying back immediately.
Who Are Your Competitors?
What direct and in-direct competition does the business currently face, and how is it currently handling competition. It is healthy to have competition in any industry, and how you handle it will be the difference between the business succeeding or failing. Conduct a competitor analysis for yourself if one is not currently available from the existing owner or if it is out of date. Old data is useless, so make sure figures and facts are relevant.
Growth Potential
Look at the business and look at where it is now. Does it have the potential for growth in the future, and if growth is on the cards, when do you think this could happen – what is the data telling you? Also, think about what markets and audiences could be reached in the future? Growth is important for any business as it ensures that your and the business’s future is secure.
