Avanti: the key points to consider when buying an existing business
25/09/2019 - Avanti
Business sales and purchases can be an exciting transition for business owners and entrepreneurs but without the right support and plan, it can be like navigating blindfolded. Avanti work closely with both business owners and prospective buyers to assist them with the next steps in their business journey. Here, Avanti share some of the common pros and cons of buying an established business over starting up.
Did You Know?
It is estimated approximately 500,000 businesses change hands every single year. It is predicted that this figure is set to drastically increase as the baby boomer generation retire.
Why Buy A Business?
If you are in a position to do so, buying a ready made business can be a fast track to established business ownership. In reality, this can actually be quite costly, complex, and time consuming.
What Could Be The Cost?
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 in the cost could be;
- Established Branding
- Customer Base
- Intellectual Property
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.
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.
- 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- Outdated software that slows your processes.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 when buying a business?
- 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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