Buying a business can be a life-changing experience, so I've put together this
video on how you can buy a business right.
Being in business for yourself is
one of the most exciting things that you can do. Sure it can be challenging, it can
be tough, but the satisfaction of running and building a successful business is
immense. So if you want to shape an independent future for you and your
family now is the time to act, and this video will help you buy it right. The
very first question you should ask yourself is am I up to the challenge of
running a business? Operating a business is not for the faint-hearted, you've got
to give it a hundred percent. For a business to succeed an owner has got to
be passionate, focused and resilient. Is that you? Some people are simply not cut
out to be a business owner. To be successful you've got to be organized,
disciplined and not afraid to make decisions. You need to be receptive to
new ideas and be able to remain calm under stress and take responsibility.
Remember when you're the boss the buck stops with you. It's well worth
considering using the help of experts in their field. Lawyers, accountants and
business brokers of course, because when you think of it, you'll probably only buy
a business once or twice in your life. They know the details that can affect
the sales process. What's a business worth? Well the seller will no doubt have
a price in mind but coming up with an offer that reflects good value in a
current market requires a great deal of the consideration, and that's why it's
vital to do your research and get good advice from those experts we spoke about.
If you're realistic with your offer you're much more likely to reach a
prompt agreement. A seller will provide their financial statements, lease
documents and any other important paperwork so you can assess how the
business is performing. But do you really know what you're looking at? It's
important to realize the seller will do everything they can to make the business
look as profitable as possible, stands to reason they want to get the best price,
so it's vital for you to get your experts to look beyond the bottom line.
If you've found a business you can feel passionate about then that's a great
starting point, then it's just the case of whether you want to buy a job or a
business. So if you see yourself as an owner-operator then you'll be looking to
buy yourself a job. You'll very much be hands-on working for an hourly rate and
enjoying the benefits of being your own boss . On the other hand if you're looking
to buy a business it is more than likely that business will have staff, premises
and processes in place which means it can operate without you being there all
the time. Your time will then be best spent
working on the business rather than in the business. So to work out whether you
want to buy a job or a business first consider your lifestyle and your
financial goals because they will most likely be the determining factors on
what you're going to buy. It's not easy to put a realistic price on a
business especially if you think you've found the perfect one. You've got to keep
your emotions at bay and that's easier said than done. The price of a business
is based on industry best practice including profitability and industry
trends, company trends and history, the equipment value and its current
condition , the capital requirements, do we need to improve that equipment, any
barriers to entry and intellectual property within the business,
the employee turnover and the owners involvement. So establishing a fair offer
that's in line with other businesses for sale will help you get the result that
you want. So the first thing you need to do is approach the person who is
handling the sale, so more often than not the person selling the business has been
appointed as a professional to sell on the behalf of the owner, maybe a broker
an accountant or a lawyer. So finding out who you're talking to is the first step,
let them know you're an interested buyer you're not just a tire kicker and
outline what you require from them and how the business fits with your future
plans. It really does pay to look beyond the
books. A little leg work can reveal a lot about the business. Spend time in the
neighborhood, see how many customers are coming and going, ask customers for their
opinions. Seek out suppliers find out what are they being paid on time,. Ask the
council if there are any new developments that are planned that could
affect the business for better will end for worse. Don't be shy keep asking
questions until you have a very good idea of what you're getting yourself
into. If you get the right answers to those questions you're on your way to
saving yourself one a lot of time and certainly a lot of money and heartache.
So the better you are prepared for buying the easier it is to get a good
buy in a short timeframe, so these tips on what to do, what paperwork to ask for
and who to get to help you will quickly get you up to speed. So contact the
person who's handling the sale and find out as much as you can about the
business, especially the reason for selling. Do your own research so you know
your market place, your competitors, what the customers think of the company, what
the customers think of the product or service and the industry. So get an
expert to help you analyze the books even if you're familiar with business
accounting having an objective third party in the mix can be a real benefit.
Find out what is negotiable, does the seller have a certain timeframe that he
needs to sell by. Are they asking a lot for goodwill? Are the plant valuations
accurate? Would they leave money in the business? There are many factors you can
use to negotiate the best possible deal. If the seller is well prepared then
they'll have all the paperwork ready for you to help you determine how the
business is doing. However be aware that until you sign an offer document the
seller may hold back certain confidential records contracts
statements employee records those sort of things so the usual documentation you
should expect to see is: a comprehensive financial statement
certainly for the last three years and prepared by an accountant, you'd want to
current year-to-date income statement in comparison to last year, records of
accounts receivable/payable, details of any mortgages or loans owned by the
business. An inventory of all plants and equipment being sold, a schedule of any
equipment that's leased, any contracts with existing customers or suppliers and
obviously any patents, trademarks copyrights or license agreements.
Well you're a hundred percent serious about buying, you've decided on a
business category that will achieve your lifestyle and your financial goals and
you're pretty passionate about it. Now all you have to do is find the right
seller, finding the right business. The problem is knowing where to look. Well
you could spread the word amongst your friends and work contacts, and check out
if anyone is looking to sell, or you could start searching the internet for
likely businesses for sale. But either way you'd only reach a very small
percentage of potential sellers. So who is the right seller? Well the right
seller is someone who can demonstrate the following: a genuine desire to sell
their business, they can demonstrate a good track record of running a
successful business and the willingness to complete the sale in good time. So
once you've signed a confidentiality or a non-disclosure agreement you may see
and ask for the following information about that business. You should get an
information memorandum and that memorandum or profile should contain a
history of the business, an overview including information about the
company's products, services, operational information and personnel structure. It
should have information regarding the market including the customer mix,
competitors, industry trends etc. A list of fixed assets that are included in the
sale and information regarding the premises lease terms, landlords name etc
You'll want those statements of financial performance and position that
we talked about, and details of any liabilities that you may have to assume,
there may be leased plant or leased equipment. Obviously you'll want details
on price, terms and sales structure under which they are operating
the business and offering it for sale.
So if you've gotten this far and you're still keen on the business and you've
seen all the relevant information it's time to put an offer on paper. This is
the good stuff. So typically your offer will include a price break down showing
assets, goodwill and stock, settlement dates, terms and conditions of sale. So
any offer that you give will have some terms and conditions, you want your terms
to be conditional on what you feel that you need, so they'll include things like
method of payment, finance conditions, the scope and length of any restraint of
trade. You want training terms from the vendor and his assistance period. You
want vendor warranties, you'll want to understand staff transition details. So
in your offer you can specify that certain conditions need to be completed
within a certain time frame, now these are specially important as all
conditions need to be met before you can declare the contract unconditional and
own the business. So what are some of the most common conditions included in
the sale? Well there'll be due diligence of course which is the verification of
financial and operational information, you want to do equipment inspections, the
landlord and lease approval and transfer will have to be approved, arrangements
and approval of finance, solicitor review of leases and contracts. Remember any
offer may be accepted rejected or modified and presented back to you as a
counteroffer. So until an agreement is reached by both
parties, either party may withdraw their offer. In considering an offer a
seller may wish to evaluate your qualifications, your financial position
and your method of securing any payments. It's worth remembering that a seller may
accept a lower price if you can show that you're in a strong financial
position to make a straightforward and quick settlement. While it is best to
begin due diligence as early as you can most sellers won't allow a formal due
diligence to be performed until of agreement has been confirmed in writing,
signed, dated and a deposit paid. So have clear time frames for your due diligence
process, a time in which necessary information will be provided and a time
in which you diligence will be completed keeps
the transactions moving along swiftly, and finally don't move into third party
issues those involving lease transfers supplier agreements etc until your due
diligence condition has been satisfied. And a meeting with employees will also
generally not be permitted until do diligence is completed and the agreement
is unconditional.
There are some very common pitfalls when buying a business
and here are just a few that you should be looking out for. The main one is not
allowing yourself enough time to find the right business, be patient
analyze the feedback from your experts and be realistic, the right business is
out there it just takes time for you to find it. And don't focus solely on making
money. If you expect your new business to make big money from day one and always
continue to do so you're likely to be disappointed. Business fortunes fluctuate
so you need to be resilient enough to survive the downturns as well as
enjoying the boom times that will be there. And please don't fail to do your
homework. Having complete accurate and verifiable financial information on any
business well that's just a given, but you cannot expect the books to tell you
the full story, you need to do your own research
and learn about the market, your competitors, the business, the customers
and the risks involved and most importantly you need to find out exactly
why is the business being sold. Another mistake is not anticipating the effects
of a change of ownership. Many owner-operators have grown their
business by the sheer force of their personality as a buyer of such a
business you have to be mindful that some customers may be lost when the
ownership changes. Similarly if a business has relied on one person's
ability to network and gain contracts these contracts could be terminated or
open to renegotiation once you take over. So you need to put plans in place
preferably with the current owner to make the changeover as seamless as
possible. Another common error is not engaging
legal and accounting professionals who are experienced in
business transactions. A lawyer who is well versed in business sales contracts
will help protect your interest in a comprehensive and efficient manner the
same as a well-chosen accountant will help ensure that you are not liable for
any outstanding debts or claims on the business. And finally please use a
business broker. There are many facets to buying a business that you just won't
know about and a good business broker will guide you through the
buying process. They'll make sure all the boxes are ticked, it's no different to
using the professional skills of a lawyer or an accountant at the end of
the day a broker can make the difference between a successful purchase or no
purchase at all. Hey thanks for watching really appreciate it, if you can think of
other ways that you can buy a business right please tell me in the comments
down below. I'd love to hear from you. Thanks for watching. If you like things
about business selling buying or selling businesses anything at all like that you
might consider subscribing. See you next time