Avanti: A guide to buying a business
24/09/2019 - Avanti Group
Day one of your business journey will be the moment you decide to hop on the exciting roller coaster ride of being a business owner. Choosing to buy an already established business, over starting from scratch, allows you to avoid some of the common pitfalls awaiting start-ups. Don’t underestimate it though, buying a business can be a lengthy and complicated process.
Did You Know?
It is estimated approximately 500,000 businesses change hands every single year. As the baby boomer generation retire, this figure is set to increase in the coming years.
Advantages Vs Disadvantages
By buying an established business, you are buying a proven concept. It is likely that many of your initial considerations and set up costs will already be in place. Included could be;
- Established Branding
- Customer Base
- Intellectual Property
You’re effectively buying a fast track into business, but at what cost?
Your upfront purchase cost will undoubtedly be high, and in some cases, it could be higher than the cost of starting from scratch, but then you have to factor in the intangible things you are purchasing such as;
- The refinement of the operating processes
- Resources spent on research and development of products
You may think you know the business after carrying out your due diligence, but familiarity comes with years of building a business, and this is the advantage of a start-up.
Business Asbestos. The business you purchase could have hidden problems that are not flagged during your research. This is why it is important to not only ensure you have good legal representation but an accountant by your side to go over the figures with a fine-tooth comb.
What Potential Problems?
- Damaged Equipment that is costly to replace.
- Outdated software that slows your processes.
- A bad reputation
Part of your purchase process must be due diligence, think of it as if buying a car, you’re likely to complete some checks whether mechanical, or legal ownership etc… If you fail to complete your due diligence ahead of a business purchase it is probable that the wheels could come off, and you’ll be driving a runaway vehicle.
What steps should you take on your business purchase journey?
- Find a business that you want to buy, then complete a risk analysis – ask yourself what the risks could be?
- Narrow your search criteria by defining your budget, resources and business goals. As you would with start-up business plan.
- Seek professional expertise and representation to help with your due diligence and negotiations.
- Secure your funding – having funding in place when approaching a seller will place you top of the buyer pile.
Whether you’re wanting 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.
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