BUYING A BUSINESS- ADVANTAGES/ DISADVANTAGES/ WHAT TO LOOK FOR

   

 

ADVANTAGES 

Established customer base and income

 Productive capacity and demand already known

Can review Financial Statements to see past profitability

Established processes and suppliers

Existing staff who know the ropes

May be lower cost

 

DISADVANTAGES

Inherit reputation and perception of business

Past poor decisions may be costly (e.g. location, staff, asset choice)

Change may be resisted by customers and staff

Potential to be mislead- window dressed results

 

WHAT TO LOOK FOR WHEN LOOKING TO BUY

Why is it being sold- ill health, retirement, financial difficulties, owner moving out of district, centralisation by major firm.

 Why is it being sold- ill health, retirement, financial difficulties, owner moving out of district, centralisation by major firm.

Will you be suitable to the type of business- do you have the necessary skills and experience.

The product or service- what are its prospects for the future

The past profitability of the business and future profitability prospects

Future cashflows.

 Immediate setup, refurbishment costs to the purchaser.

The reputation of the business that the existing owner has established.

What is being sold- goodwill, assets, distribution rights.

Valuation of goodwill- is it fair.

The valuation of the assets- is this fair.

The state of the assets- will it be necessary to spend a lot of money on these for repairs in the near future-   are they modern- do they need to be replaced.

Availability of suppliers

Population shifts that may affect customer base

Competitors in the industry- their strengths and weaknesses

Availability of legal and accounting services-   you may have to use their services in consideration of the business purchase-  it is essential that you use the services of an appropriately qualified Accountant to advise you on the previous Financial Statements. 

Leases- types, conditions

Government and local body regulations

What finance are you able to provide and what do you have to borrow- where will you obtain these loans and can you meet the repayments

Is the business worth the effort-  can better returns be achieved by investing elsewhere with less effort and hassles

  Business setup for purchase- self employed, partnership, company.

 

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