Making informed buying decisions has never been easier.
With the rise of the review-driven online marketplace, consumers today can compare hundreds of different products with transparent customer testimonials and objective rating systems. This doesn’t simply apply to buying a new pair of earbuds on Amazon; it also helps consumers travel better, hire better, and live better.
Unfortunately, this new buying process hasn’t extended to potentially life-changing purchases like homes or businesses. In these markets, you’ll still need all the help you can get to ensure you’re not spending your life savings on a lemon.
That’s why we’re here to help.
We’ve compiled 5 top tips that will guide you in buying a business in the UK and secure a more stable, successful financial future for you and your family.
1. Work Within Your Budget
One of the first things you’ll consider in buying any business in the UK is your budget.
If you’re buying an existing business, you’ll likely need hundreds of thousands of pounds, if not millions of pounds in the form of a bank loan, to become the sole owner. While the rewards of sole ownership can certainly be great, the risks are as well.
Fortunately, there are hundreds of low-cost franchises with minimum required investments as low as £0. This allows you to get your foot in the door on a shoestring budget and quickly start generating revenues and growing your portfolio.
2. Assess Your Sense Of Risk and Reward
If you’re looking to become wealthy and never have to work another day in your life, then you’re likely best suited for high-risk, high-growth opportunities like financial trading or even a chain restaurant. These businesses, while risky, can set you up for life in a matter of a few years.
If instead, you’re looking to find more satisfaction in your job and are comfortable working for a long time, then you should gravitate towards lifestyle and home-based businesses that fit your interests, like web design or business mentoring.
While these companies might not immediately lead to millionaire status, they can provide a tremendous sense of fulfillment and ownership. They also are perfect if you’re simply looking for a steady, reliable stream of income that will allow you to sleep at night even in times of financial uncertainty.
3. Conduct Research And Due Diligence
A thorough inspection is required of any large purchase. You wouldn’t buy a house without hiring an expert to check out the pipes, electrical wiring, and foundation. You should be just as diligent (if not more so) when buying a business.
This research can be split into three different, crucial areas:
- Commercial Performance
- Financial Health
- Potential Legal Issues
Commercial Performance
Business is all about revenues and expenditures. Become as familiar as you can with the sector you’re working in. Once you’ve done your research, measure up the prospective company’s financial performance with comparable firms.
Here are a few questions you’re going to want to ask when it comes to commercial performance:
- What systems and processes does the business have in place? Is there any way that these can be improved?
- Do the services or goods offered by the company fully satisfy its client base? How could the product be improved?
- Is their business plan competitive or not? If you believe there’s still ample room for growth, what projections back up your belief?
Financial Health
Most importantly, you’ll want to hire a trained financial auditor to discover any transactions that haven’t been recorded by the current owner.
Are there any debts that the company has taken on? Are they from safe and reliable creditors or risky and unproven? If the debts are questionable, then other aspects of the company may be as well.
Financial auditors are trained to double and triple check every financial account to ensure that everything’s in order. If there are inexplicable discrepancies, don’t be afraid to walk away. You never know what other skeletons in the closet might pop up down the road.
Legal Issues
One of the trickiest inspections in buying any business is found on the legal side of the corporation.
It’s absolutely worth it to enlist the services of a trusted attorney to uncover any future legal issues before you sign on the dotted line.
Of course, this includes any pending lawsuits or governmental proceedings that might transform the nature of the business. You’ll also want to learn the ins and outs of the business entity, including the establishing documents as well as any bylaws, resolutions, or operating agreements you’ll need to abide by as the new owner.
4. Establish A Deadline
In business, a deal is never done until everyone’s signed on the dotted line. Budding entrepreneurs often discover that financial negotiations can drag on for weeks or months, leaving both parties frustrated and worn out.
At the outset of any business negotiation, establish a reasonable yet firm deadline at which you expect the deal to be completed. This establishes a time horizon and encourages all those involved to get the work done in a timely fashion.
If the sellers in the deal aren’t willing to cooperate to meet reasonable standards on price and terms, you could take this as an omen when it comes to other areas of their business. Remember, your time is valuable. If you demonstrate that you value your time, then others will follow suit.
5. Be Willing To Walk Away
As humans, we can quickly grow invested in prospective deals. Without even trying, we fantasize about the financial possibilities that accompany any new business venture.
However, as an entrepreneur, you’ll have to suppress this impulse and utilize the rational side of your mind instead. You have to be willing to walk away from the deal entirely. Otherwise, the seller holds all the power.
Conduct market research and consult with trusted colleagues with a great deal of business acumen — how much is this business worth? Once you’ve considered all qualifying factors, come up with a number that you won’t budge on. That’s your upper limit.
If the seller doesn’t meet you at your limit, then you walk away. Of course, if you’re able to negotiate the seller down to a bargain deal, then all power to you! If you let the seller know that you’re willing to walk away, they’ll be forced to compromise to complete the deal.
Succeed By Buying A Business In The UK
Buying a business is one of the most significant decisions you’ll make in your professional life. It signals an intent to stand out from the crowd and illustrates self-belief in your ability to steward the company to newfound heights.
Due to the gravity of the purchase, you’ll want to do everything in your power to make as informed a decision as possible.
That’s why we’re here.
Browse our information centre to learn everything there is to know about buying a business in the UK, from the importance of business location to the advantages and disadvantages of franchising.
