You want to run your own business but don’t want to start a new business. So your next option is to consider buying an existing business that is already on the market. Buying a business can be exciting but it is important to go into this with your eyes open. There are risks and your job is to minimize the risk.
If you are very risk averse, then my advice would be to look at a franchise business. A franchise already has a good track record. The business is systemized so that you can learn and implement the system. There is also good training available from most franchisors because it’s important to them that you are successful.
Unless you’ve already run a business and know what to look for, whenever you are buying a business, it’s important to ask for and take a lot of advice, I’ll assume you haven’t been in business before, but if you have, these tips about buying or what to do just after buying the business are always a good refresher.
Take time to research and study your findings. A business that is for sale will have accounts available for the last three years. See an independent accountant to look through the numbers and check if there are any unusual entries that need investigation or clarification.
Generally, only historic accounts are provided as standard, so you must also ask for current figures. Perhaps there is good historical trading but the business is in decline? That’s not necessarily a bad thing, if you know the reasons for this and have a solid game plan to implement. However, you need to know the ALL the numbers.
Get to know the business. It’s worth taking time off and, if the current owners will allow it, working there to get the feel of things. Negotiations for the purchase will most likely have more or less been finalized before an owner will open their doors to you, however it’s still very useful as it will help you get to know the business, owners and staff better. It’s amazing how much you find out from small talk.
Look beyond the business and study the industry.
- What are the trends in the industry?
- What are the threats or concerns within the industry? You need to look at the business with these in mind.
- Is the business doing something now to combat the threats or be ready for potential changes? If not, then you need to understand how to bridge this gap and the potential costs involved.
- Is there going to be a requirement to invest in new machinery or other capital expenditure? Are computer systems tired or so out-date that investment is required in hardware and software?
Research your competition too.
- Which businesses do the owners and staff consider to be the toughest competition?
- What are these businesses doing that is different?
- Why are they better?
- Which areas are they performing worse?
Understanding this will help you decide what investment may be required for your proposed business to compete.
Most businesses have a data base. Accountants will think of the data base as a considerable part of the goodwill in the business. You must be clear whether there is any gold in this data base.
- How up-to-date is it?
- How many customers continue to purchase from the business?
- How many do not buy anymore?
- How often does the business communicate with their data base?
If there is virtually no communication, then it’s a very weak data base and the value of goodwill should be reflected in it.
From an outsiders point of view, it’s worth visiting some of the competition and see how you are treated as a potential customer. Through your discussions with their sales people you may get to know their thoughts about your proposed business. Has it got a good or bad reputation? If so, do you need to re-plan or re-think?
Finally, on this point, go and talk to the neighbours. Which businesses reside next door or on the same trading estate? Talk to them to hear their stories, I’m sure there will be one or two that may provide vital information.
The bottom line here is that you do not commit yours or any borrowed money to buying a business until you are clear what you are buying.
2. Hire a consultant or business coach
If you’ve never run a business before, then you need to hire a business coach or consultant. It’s important that you have somebody with business experience to listen to your ideas, concerns etc who are dedicated to helping you achieve your goals. Being in business can be lonely and it is very easy to make poor decisions without another person to discuss your thoughts and give you good feedback.
There’s no point talking to your pals or the man in the pub about it unless they are themselves successful in business. If they are, then hopefully you will receive the help you need. However, it’s unlikely they will have as broad a range of experience as a good business coach.
Working with a business coach or consultant can help you make the right decisions and ensure the action happens to support these decisions to move the business forward. Business coaches generally know a lot of other business experts and this will help you to get the expert help you need. This can save you a huge amount of time.Buying or just bought a business? Here’s 3 tips to help you become successful… Click To Tweet
3. Be careful not to change too much too soon
Whether you’ve just purchased or you are about to purchase a business, it’s important to recognize that change leads to uncertainty. Staff need to gain confidence in your ability to run the business. The old phrase about the new broom sweeping clean springs to mind here.
Jumping into a new business venture and thinking you are going to change everything can be dangerous. Perhaps the business needs it. However, timing is everything. Too much change is unsettling so it’s vital you get the staff on your side. I’m sure some will wish to keep everything running just as they were. Others will be looking for developments.
From your point of view, there will be a priority list, or there should be. You’ve just invested money into this business and no doubt borrowed money too. That means the business needs to be more profitable to pay back the loans and investment. To achieve this, I hope you and your business coach have devised a solid game plan with timescales.
The important people are your staff and your customers. You need to be pleasing both parties. Hopefully you’ve understood what customers love about the business, especially those that are repeat buyers. If not, this must be a priory before you implement too many changes.
Customer forums are a great way of gathering information, if you ask the right questions and really listen. Test understanding along the way. During these forums, you’ll be given so many ideas that could help your business deliver so much more value to the customer.
Your staff can be a great source of information and ideas too. Staff meetings may not have happened often in the past, or at all. This is an ideal way of gaining new insights, thoughts, ideas into what the business has delivered in the past, is delivering now and what it needs to deliver in the future. Incorporating some of these ideas into your business plan will create a greater sense of belonging and team. You may also find that as the staff open up during these meetings, new leaders and/or management potential emerges.
In summary, whether you’re looking to buy, or are buying or you’ve just bought a business, there are tips in this article to help you be successful. Take your time to investigate before you implement.