5 Things You should Consider Before Buying a Business


Whether you’re looking at a takeaway for sale, home gardening franchise, IT Company or something else entirely, thoroughly investigate any established business before you consider purchasing it.

Every owner wants to be making a good investment, but where to start? See below for the things you should firstly address when assessing businesses that you intend to buy.

Address 5 Things before Buying a Business

5 Things You should Consider Before Buying a Business

1. Write Your Business Plan

Failing to plan is planning to fail, so do you have a business plan? Best practice is to have such documentation in order to establish goals, monitor progress, be competitive and provide other parties (like investors) an insight into your management skills.

If you’re trying to obtain finance to buy a business, you will also generally require one, as well as a marketing plan, so get writing. Don’t forget to review and update this document periodically!

2. Start Finding a Business

Once some preliminary planning has occurred and which industry you will operate in has hopefully been determined, turn your thoughts towards finding the type of business that will suit your situation best. You should consider businesses that have sound future prospects and ideally, a good business history.

An experienced operator, however, could use a poor public image as a means to buy a failing business for a discounted price, if they have the ability and resources to turn it around to a profitable enterprise.

3. Negotiate for Fair Price

However, it is important to investigate these factors further in order to determine a fair price for yourself and the vendor. From there, use this baseline figure to enter into whatever negotiations that you see fit such as price reductions, or extra inclusions for a proposed figure.

Knowing the reasons why a vendor is selling a business is an important step in this process and is part of forming an accurate insight into its current operation.

4. Check History before Buying a Business

You should also consider purchasing a business only if you can access comprehensive sales records prior to a contract of ownership being finalized.

Knowing whether it has established cash flow, identifying patterns in data and whether it is profitable overall is a good place to start when looking at financial records of this nature.

On this topic, you should also be clear on the costs that the business incurs, and be critical of what you have been presented with and whether it’s a reasonable assessment of the current outgoings. Be on the lookout for fixed costs, supplier contracts, asset and real estate leasing obligations and of course, any liabilities that you could potentially inherit – any debts should be clearly identified so you know what expenses you will be responsible for.

5. Get Business Structure Overview

Business structure will also be a central factor in deciding what business type to pursue. Although a restructure is certainly possible once you have settled on your purchase, you will need to manage these changes carefully to allow your business to be successful and grow on your terms.

Business advisors, accountants and solicitors will be able to assist you particularly if you’re unsure about whether the tax obligations and corporate governance structure that you’re buying into will suit your anticipated operating method.

Finally, the Department of Innovation, Industry and Science is a great, free resource to access when planning your move into business ownership. Begin by heading online to access their fact sheets, services, grant opportunities and other templates and tools that will allow you gain a sense of the regulatory requirements and financial implications that you may have to consider.

They also have an advisory service which can assist small business owners and a referral service, if needed; to match you with the organisations best qualified to address specific queries that you may have. Happy searching!