Tips on Buying a Small Business
A Drive by Guide to Buying a Small or Boutique Business
This is not an in depth description of all the things that you need to investigate on buying a business, but some key factors to consider before you spend serious money on in depth research.
A potential buyer can spend hours driving miles to arrive at a place that may appear like their idea of a dream business, but without considering some key factors, the whole thing will come to nothing.
Whatever business you decide on, you have to have a Core Business.
A Core Business in a shop may be 20 people that come in every day for similar things, in a restaurant 10 people that eat with you once a week, 15 people that eat with you once every two weeks.
In a manufacturing business six companies that require small orders regularly.
Not a major company that gives you a massive order at a very tight price and ties up all your production and goes somewhere else for the next contract.
The Core Business can change in retailing as you become more successful, always remember People make People, good customers need looking after.
If you can't see a basis for a Core Business be very wary.
The saying Location, Location, Location, is always appropriate depending on how much money you have to spend.
Top locations are expensive and so are the overheads, there is a balance depending on your business.
If you are in retailing you need chimney pots, with lots of people and far enough away from the nearest Supermarket.
Don't buy a country, foody pub within a mile and a half of the town centre, depending on the size of the town, the locals have one drink in your pub and go to town, they didn't used to but they do now, the drinks are far cheaper in town because of the competition.
A country foody pub or restaurant does better three miles or more out of town, you become destination pub, people like to drive out for a nice meal and a convivial drink.
You need to check the local area to ensure that you have sufficient communities that you consider would be your customers, this can be done in depth later, but an initial check is useful.
Roses round the Door
The expression used all to frequently, when people fall in love with a business, because it looks like their dream, think what it will look like in the Winter.
Check the roof to see how many tiles or shingles are missing, look for any settlement cracks in the walls, mould running up the external walls, signs of damp, trees damaging the brickwork, make a note of everything and if you do proceed get the surveyor to check these things.
Signs of drains over flowing, the state of the gardens, if any, adequate parking, or parking restrictions that are not compatible with your business.
The selling agents details should give an indication of the level of business being done, is it realistic against it's situation?
E.G.Electricity, Gas, Business Rates, Water Rates and Staff bills, do they sound realistic?
This is only a superficial appraisal of the business, not an in depth one, if all these points add up, then make an appointment to view and that's when a full investigation needs to take place, if you decide to go ahead.
If you do get inside and it's a food business, always check the cutlery draw to see whether there's sufficient cutlery to do the level of business that they claim.
The idea of these Tips is to provide a drive by check, a viewer can waste days of valuable time looking at property, where the exterior says it all.
A very useful expression when considering buying a business, "Marry in Haste and Repent at Leisure".
Never ever rush buying a business, all vendors and selling agents are economical with the truth, they don't lie, but tell you what you want to hear not what you need to hear, they frequently tell you after you have shown interest that there is another buyer, keep a cool head.
Buying a Business is not like buying a house, it's a commercial transaction and should be treated as such.