HAVE A LOW RISK PLAN…….AND STICK TO IT!
- Work out ……..
How far are you prepared to travel?
Will your spouse or partner be involved in the business?
What is your budget for the purchase? These are basic but important. - Surround yourself with professionals
A very good business friend, an SME accountant, a lawyer as a minimum.
Good advisors will assist you to make the right decision and reduce the risk of an error……but remember the final decision is yours. - Check your budget.
Make sure you have enough money.
Don’t forget to allow for those extra costs, stamp duty, legal costs & working capital as well as the basic purchase price, and remember the banks are tough. Nothing is more embarrassing than to find out too late that you don’t have enough money. - Match, Match, Match
Make sure you are suited to the business.
If you are an engineer don’t even think about buying a restaurant, and if you are a chef don’t look at engineering businesses. A bad match can be a disaster. - Remember the Profit / Price rule.
Remember there is a direct link between the profit of the business and the price you need to pay.
The more profit you want the higher the price. Don’t be greedy and start big. You may be better off to start small and work your way up. A smaller purchase price reduces the size of the risk - “Get it in writing”
Don’t trust sellers who say “trust me it will be ok!” It probably won’t be.
If the owner is reluctant to give you detailed written information go and look for another business, it will turn out cheaper in the long run. - Develop a written business plan.
We have all heard this old cliché, but it’s true.
“If you fail to plan you plan to fail.” You may get a big surprise during the planning phase and find out something that surprises you. Run your plan past your accountant for second opinion. Two heads are better than one. - Avoid negative assumptions.
It is a negative approach and a bad habit to continue to make negative assumptions during the business buying process. Rather than jump to negative conclusions seek the facts from the owner and check them out for yourself. This positive approach may avoid you missing a good business or worse still buying a bad one. - Check with your family or support team.
Ensure you have the full support of your spouse or partner before you start. At some point you may need to get documents signed by your partner.
You are wise to find out if your partner is on side before you commence looking. - Negotiate a gentlemen’s deal.
You may be better off to pay for a slightly higher price and maintain the goodwill of the owner for future support. Think long term not short term.
Ongoing support will reduce your risk.
… and, GOOD LUCK. I HOPE YOU HAVE FUN ALONG THE WAY!
REMEMBER IF OWNING AND BUYING A BUSINESS WAS EASY,NO ONE WOULD WORK FOR THE GOVERNMENT.