If you’re looking to buy a business, you may know exactly what it is you’re after. You may have a passion within a particular sector you’re keen to try your hand at, or you may be looking to expand an existing business.
But it’s normal to have some concerns. Is it the right business for you? Where’s the best place to start looking? Are you going about it the right way? What about finances? We’re here to help you tackle these questions and get prepared.
Let’s look at some key considerations to bear in mind before you start your search.
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- Which business sector is a good fit for you? Consider your personal interests and goals, as well as your background and skills.
- Is the venture more about job satisfaction or do you want to make money? If the latter, how profitable is the sector you’re interested in?
- How much are you willing and able to invest?
- Where do you want to be located and what tenure do you require: leasehold or freehold?
- Can you cover the additional costs of buying a business? You’ll need solicitors, accountants, business brokers and other professional services.
Answering these questions should help you get ready and focus your search.
Next, if you haven’t already set your sights on a particular business, here are some great places to look:
A good place to start is one of the most established and popular marketplaces for buying and selling businesses. Search Daltons online platform to get over 26,000 listings for small to medium-sized businesses for sale.
Another user-friendly online marketplace to try is Rightbiz. This is one of the UK’s fastest growing marketplaces. And, the website has really useful business summaries, so you can see all the key information in one place.
You can also register with Nationwide Businesses and either browse their listings yourself or have their sales team find businesses that match what you’re looking for.
You’ll need to be clear on how you’ll raise funds to purchase a business before making an offer. You can use these methods¹:
- Existing savings which you wish to invest
- Commercial loan from a bank, building society or credit union - where money is borrowed and repaid with interest within a set timeframe
- Equity financing - where investors invest cash in exchange for a stake in the business
- Vendor financing - where a deposit is paid to the vendor and the rest of the payment is made in instalments, with interest.
To secure a loan, you’ll usually need to provide the lender with the following - the details of the business and sale, accounts/financial projections and your personal assets and liabilities.²
Once you’ve found what looks like a suitable business, you can start following the steps to purchase. First you’ll want to find out more.
Many online marketplaces will let you send a direct message. Demonstrate your sincere interest and knowledge of the sector, as well as your financial plans, to show the vendor you’re a serious buyer.
You can request more information too. Some examples of things you might ask about include the age of the business and the reason for sale, recent annual revenues and net profits.
If you’re satisfied with the response and want to move forward, make your initial offer and justify it. Regardless of how you do this, make sure you follow up in writing. And, always include ‘subject to contract’ in written correspondence.
Be prepared to go into negotiations in the event that your opening offer isn’t accepted. Make sure you know how much you’re willing to invest and at which point you’ll walk away. Then stick to this.
Although not strictly needed, it may be a good idea to have a business broker to assist you through face-to-face negotiations. Their expertise can help you reach a satisfactory outcome on good, professional terms with the seller.
Offer accepted? Before anything is guaranteed you’ll need to make sure everything is in order. This is a crucial step to get right. It’s advisable to appoint both solicitors and accountants to help you check everything over and decide whether the business represents a good investment.
These are key areas to look into³:
- Paper trail - accounts and VAT returns
- Projected financial performance
- Employment contracts
- Assets of the business - property/leases, equipment
- Contracts and orders
- Legal proceedings - including any debts or litigation.
If you discover problems that the seller hasn’t been upfront with you about, this is a warning sign. Depending on the circumstances, you should seek professional advice. Don’t be afraid to walk away rather than run the risk of future difficulties.
Hopefully though, all will go well and you’ll be ready to purchase. Set a date with the seller to aim for completion, be flexible but keep things moving forward. Remember that things can still fall through until all conditions of the sale are met and contracts have been transferred.
If you’re looking to buy or sell a business overseas, you’ll need a payment solution to reduce your overall international transfer costs as these kinds of transactions can be quite expensive using traditional banks.
|To reduce the costs, open a multi-currency account with Wise and you can send money overseas for tiny fees and currency conversion at the real market rate with no mark-up. And if you end up selling your business to an overseas buyer, you can receive the funds without the high recipient fees charged by many banks.|
You could also benefit from sharing local account details from Wise. With these, you’ll be able to receive money in the local currency and convert it later yourself using Wise’s far better exchange rate.
After reading this guide, you should have everything you need to get started on buying a business.
Remember to keep your personal goals and budget in mind and think things through carefully at every stage, making sure you’re thorough in your investigations.
Finally, don’t be afraid to ask questions or seek professional advice. And, with luck you’ll be a new business owner soon!
Sources used for this article:
Sources checked on 29-April-2021.
This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.
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