If you’re looking to buy a small business there are, as you’d imagine, a wide range of factors you should look into ahead of putting pen to paper to make sure any purchase you do make is the right buy for you, given the fact that this is a business that you’ll, hopefully, be involved with for many years to come.
In reality, there are only two areas in which you’ll need to focus your time and energy ahead of purchasing a small business. If you do these well, you’ll find yourself with a business that will work for you for years to come.
Do Your Homework
Doing your homework ahead of purchasing a small business if essential if you want the sale to be a success from your point of view. This means everything from looking at the company accounts to ensure they’re accurate and up-to-date, to asking to take a look at the business’s current (and former) business plans, to even speaking with each member of staff individually to get a feel for how well the company has been run up to that point.
Of course, the latter point shouldn’t require too much work if you’re looking to buy a smaller (or micro) business, but it does provide the risk that the small number of employees are less likely to speak their mind, given that anything they say could be more easily traced back to them.
If you already own a business and work alongside an accountant you would be wise to pass the company’s accounts and business plans over to them for a second opinion on their strength and viability.
Learn How to Negotiate
Leaning how to negotiate is an essential skill should you be looking to purchase a small business, as your ability to negotiate will come to your aid (or be your downfall) time and again throughout the purchase process.
Learning how to negotiate can save you a small fortune on the eventual purchase price when you’re looking into how the business is valued, and how this valuation compares to other small businesses of similar standing (and industry) in the area, as well as how it compares to other small businesses in the same market that have sold in the last couple of years.
Once you’ve learned how to negotiate you’ll be in a strong position to argue the business’s current opportunities for growth, something you can uncover by looking into its current and potential markets, as well as performing a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis. Arguing that the business faces a harder and more competitive market than the current business owners claim may help to reduce your purchase price.
Hire an SME Accountant
Once the sale goes through you should hire an SME (small or medium-sized business) accountant as soon as possible, providing them with access to any past accounts that were transferred to you as part of the sale so they have a basis from which to start your newly purchased business’s accounts going forward.
To speak with a professional SME accountant to discuss the process of purchasing a small business, and your accounting liabilities thereafter, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.