Many people decide to buy a business because they think it will be less work than a 9-5 job, or they think that at least they can’t be sacked. The first is simply not true and while the second may be true, a business can easily fail and so in that way they will lose their job – and often much more. So before you purchase a business, consult with commercial lawyers and an accountant to make sure it is a good deal.
Meanwhile, here is a checklist of things to see about before you buy.
- Make sure the sellers are not due for pending litigation. This can point to problems with the business.
- Do your financial due diligence by having an accountant crunch the numbers you’ve been given. They will soon seen if the profit has been artificially inflated just prior to selling.
- Find out what the lease is on the business. If it is due soon and the landlord only gives short leases, this could be a red flag for a poor business choice.
- Set goals for your business and ensure that there is nothing to prevent them from happening. Make sure the lease is fair and renewable and that there are no hidden costs.
- Before choosing business to buy, make sure there is a good market for the things it sells.
- Make sure there is an established client base. The business should be able to give you a list in many cases. If not, sit outside the business at various times of the day to see how many customers go it. This is time well-spent as a failing business wont’ have many customers.
- A business takes a lot of effort to run. If the business is well –established the staff may not like a new owner. Make sure you are physically and emotionally fit enough.
- If you don’t have people skills, make sure you put in a manager that does. Most businesses cannot be run successfully without someone at the helm who can get along with both staff and customers.
- Get an independent valuation of the worth of the business. Many business owners are emotionally involved and see their business as worth much more than it is.
- Get certified financial statements for the previous three years to ensure the business is making a profit.
- You’ll need a copy of the balance sheet to ascertain debts and liabilities.
- You’ll need a list of plant, stock and equipment that is included in the price. Make sure the owner can prove ownership of these things.
- Get a copy of the lease agreement.
- Don’t sign anything until you have gone over all the details carefully with a commercial lawyer.