What You Need to Consider If You're Trying to Buy a Business As a Going Concern

Do you like the idea of being an independent business owner, but are not sure if you want to start the entire process from scratch? In other words, do you want to take advantage of other people's experience (and mistakes) so that you get a head start in your endeavours? If so, then you will need to look at businesses that are for sale as an ongoing concern and satisfy yourself that they will be the right choice for you. However, you do need to be very careful here and make sure that you are looking at the right information. What do you need to bear in mind?

What to Look for

Some people say that you can manipulate figures and statistics, so that they tell you anything that you want to hear. While that may be true in certain circumstances, you can nevertheless get a good feel for the integrity of an existing business by poring over the relevant statistics carefully.

Location, Location, Location

If you're buying a bricks and mortar operation, then its location is paramount. Are there other similar businesses close by, or do you have a fairly potent catchment area? You can begin by analysing the foot traffic in the vicinity on various days of the week, to get a good feel for potential.

Getting All the Data

The seller will need to hand over a significant amount of data and you should be wary if they seem recalcitrant to do so in any area. You simply cannot make a fully informed decision unless you have access to all the data, even if you may be asked to sign a nondisclosure agreement before you do so.

Customer Retention

A customer list is a very important asset and you will hopefully get access to computer records showing what type of cash flow they can provide. If you can see patterns of loyalty, all the better and ideally there will be regular purchases of profitable goods.

Turnover

What is the turnover like within this particular business, assuming it is a retail operation? Have a look at the stock on hand and its value and see how much of that will be transferred over to you within the purchase price.

Profitability

It's very important to look at last year's profit and loss account, together with the company's balance sheet. This will help you determine how profitable it is and if it is able to give you the type of income stream that you want.

Employee Retention

Next, have a look at the employees. Are any of these individuals likely to remain when you take it over? In any customer-facing organisation, employees can be critical and especially if they have built up a warm relationship with regular customers.

Business Structure

Finally, have a word with your accountant to determine what type of business structure you need to create, should you move forward. There are many different choices, and you will want to safeguard yourself and your family so that you are segregated from the business itself.