Whether you’re a first time business owner, or have experience in operating your own enterprise, buying a business is a fantastic opportunity to undertake a new challenge.
There are many benefits to purchasing an existing business - in successful transactions, you have a ready-made brand with operating procedures and infrastructures in place, as well as an existing customer base, and a strong foundation on which to stimulate growth.
That said, there are a number of potential challenges too. This article explores five crucial elements to consider when buying a business.
1. Why this business?
Think about the business you are planning to purchase. What is its unique selling point? What does it do well? What are its shortcomings, and how can you improve upon these? What is the longevity of its industry and opportunities for growth?
It’s easy to get caught up in the excitement of a prospective new venture, especially if the opportunity has presented itself at seemingly the right time. But it’s important to be deliberate in your decision to see return on investment.
2. What can you bring to the table?
The next thing to consider is your own experience.
Are you new to the industry that this business operates in? Do you understand the needs and expectations of the client base? Do you have the knowledge and expertise to predict trends and patterns and create a strategy for the future?
If you are already experienced both in business management and the industry, consider what opportunities you can identify for development and diversification, and think about how your skillset can make that happen.
3. Legal protections
When purchasing a business, there are a number of legal considerations.
You must carry out due diligence, a term which encompasses many essential checks including but not limited to:
- Finances, including cash flow, tax, and expenses
- Legal concerns such as insurance requirements, permits, and licences
- Operational structure including procedures, suppliers, equipment and premises
An experienced solicitor such as Dickinson Parker Hill Law will help you carry out all requisite checks to assess anything which may potentially negatively impact the value of the business.
4. Historical challenges
Almost all businesses will experience tricky patches, whether that’s a dip in sales caused by market conditions, difficulty managing periods of rapid growth, or challenges in resources, supply and staffing.
Make sure you’re clear about any issues the business you are purchasing may have faced in the past, and how these were addressed, as well as the likelihood of these arising again in the future and what measures need to be in place to prevent this.
5. Attitudes to new ownership
A business changing hands can bring change for the better, but you may experience some resistance initially, and it’s important to plan ahead.
For instance, new ownership could potentially be worrying to existing staff, who may be concerned about job security and a change in the working environment.
Equally, clients may be concerned about the quality of service or product, as well as the prospect of dealing with new contacts if they have long-standing relationships with existing team members.
Ensure empathetic reassurance at every stage of the process for all stakeholders. Be sure to listen to concerns, and ensure you have systems in place to manage these in an efficient way. Use the support of HR to aid your staff in the transition, and consider investing in a CRM such as SuperOffice to ensure client retention is managed strategically.
If you are thinking of taking over a particular business or are looking for a new venture to invest in, these are just five key considerations.