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
| |
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. |
If we can assist further, please email TotalAccounting as follows:
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