For some aspiring entrepreneurs, buying an existing business with knowledgeable staff, an existing client base and a great location is a much more attractive prospect than spending years building a business from the ground up.
Whilst it may seem easier than starting from scratch, there are quite a few factors you should consider before jumping in the deep end and buying any old business just for the sake of calling yourself an entrepreneur. Running a business is a huge responsibility, not to be taken lightly!
In this piece, we have rounded up five essential factors you should really think about before taking the plunge.
1. The industry you want to go into
Say for example you’re scrolling through listings of businesses for sale and spot what looks like a great deal in a fantastic location and want to jump into a viewing right away. Hold on a second! Is this even the industry you want to go into?
If you’re going to spend years running a business, you want it to be something that you enjoy – this could potentially be a job for life. Perhaps you pick an industry you already have experience in and want to move up to ownership level. You will have the years of experience needed to deeply understand the industry, its current challenges and how you can stand out from competitors.
For example, you may currently be the manager of a pub, but it isn’t in a great location, which is stunting your growth and revenue due to lack of footfall. Perhaps you want to own a pub in a city centre and stand out from other local pubs by offering fancy new drinks or an ‘Instagrammable’ design to attract new customers in.
Or, perhaps you want a complete change of industry and want to try your hand at another venture entirely – a fresh perspective can shake up the industry. It might be worth pursuing a career in this industry at a lower level for a year or so in order to gain valuable inside knowledge that can help you with your entrepreneurial journey.
2. Research beforehand
Have a real look at what’s out there and don’t limit yourself – you might find a great prospect just outside your ideal location. Once you start to shortlist businesses you may be interested in, research them individually too. Some telling factors to check include:
- Their website: is it established or will it need some serious work?
- Their social media profiles: do they have a decent following? Are they getting positive engagement from customers?
- Their reviews: pay attention to all reviews, especially negative ones – this could indicate a serious issue that may need to be addressed. Look at Google Business listings, social media reviews, Trustpilot etc.
If the business is based in your local area, you may want to consider driving or walking past, even posing as a customer to see what the place and customer experience is like.
You may also want to think about exactly why the owner is selling – is it something as simple as heading into retirement or is there a more serious issue at play, such as cash flow problems? Doing a bit of digging can help you to avoid taking on a business that is headed towards failure.
3. Trust your gut during initial viewings
Initial viewings are when becoming your own manager looks like a reality – this is one of the most exciting parts! Be wary of jumping at the first offer out of excitement or pressure from the broker. Wait until you’ve seen all of your prospects before making a final decision, and trust your gut. Could you really see yourself working at this place every day?
Also, be wary of making it too obvious why you are there. Some owners do not tell their staff that they are selling the business until it is official. You may be told this beforehand, or even asked to sign a confidentiality agreement, but it’s always worth double-checking rather than potentially causing issues for your future business!
4. Don’t be afraid to ask for external help
Buying the wrong business can be a very costly mistake, so it’s worth investing in external advice first rather than paying for the wrong decision afterward.
Consider consulting an accountant or solicitor for financial and legal advice about the business. You should have access to their accounts at this point, so the accountant or solicitor can flag up any potential issues you may have missed or that weren’t made obvious to you initially. You can then question these before officially signing over. You may also want some informal help from your trusted business contacts or even friends and family.
5. Review the full list of business assets
Once you receive a full list of business assets, set aside a few hours to really go through and review each of the items. Be wary of situations where you may have to invest in the reinvigoration of the assets, e.g. an old office building that may now be posing a health and safety risk to employees if action is not taken soon. Creditors may also have security interest on some assets – a solicitor can help you investigate this.
6. How you would manage staff during the handover process
This is an incredibly important aspect to bear in mind before making your final decision – in some instances, employees may not even be notified of new ownership until as little as 48 hours before the handover takes place in order to prevent them from jumping ship out of fear.
Naturally, you want all employees to stay. After all, they know the ropes and have a rapport with existing customers and clients. If you are going to change the terms of their contract, notify them as soon as possible to avoid any issues and even legal implications. Make sure you inform the team of any other changes such as payroll and disciplinary procedures.
Get to know the team as soon as you can. Building rapport will help to ease the handover process, ensuring a smooth transition into your new role as the owner of the business.
