Buying and Selling a Business

 

 

Buying

If you are looking to become self employed it can sometimes be easier to buy an existing business rather than setting one up from scratch however there can also be a number of disadvantages as well.

Advantages

You will have an existing client base
You may find it easier to obtain finance as the business will have a track record
You will have a trained/skilled workforce in place

Disadvantages

Start up costs could become substantially increased
You could assume liability for any previous monies outstanding to company clients

If you are thinking about buying a business but not sure in what industry it is important that you identify your skills set and how that might match to your chosen profession, it might mean that you have to undertake some additional training in preparation and it is incredibly important that you identify potential shortages prior to purchasing a business as afterwards it could begin to cost you money.

If you decide to buy a business it is important to consider why is the previous owner selling and if there is a reason could this potentially effect business.  Upon buying a business you will usually inherit a workforce, it is important to understand an existing employee’s rights under TUPE, for further guidance click here.  Apart from their legal rights, they will have a wealth of experience and knowledge about your business that could assist you in your organisations growth and development.

If you find a business that you decide you are interested in then it is highly advisable that you enlist professional advice such as an accountant and solicitor, they will be able to support you through the process and any due diligence carried out.

Selling

If you are looking to sell your business there are a number of steps you should follow in order to achieve success.
Valuing your business can be done using a number of methods, when carrying out this process it important to show logic behind your decision and not presenting would be random numbers as this could put potential buyers off.  You should look at making your business appear as attractive as possible to a prospective buyer ensuring all paperwork and financial records are accurate and current as this can promote a positive image of your company.

If you are considering selling your business that it is a good idea to enlist the help of a broker, they will provide you with step by step support; you should do your research carefully before choosing an advisory company and if possible obtain recommendations from colleagues.

Franchise

This service allows you to purchase a business with an existing brand and marketing strategies in place, an example of these types of businesses would be McDonalds or Subway, two of the most successful franchises.  Here you would usually pay a franchise fee which would include any training etc needed before starting the business and then a percentage of your turnover to cover administration and marketing. 

This can be an excellent way to start your self employed life as there is usually a large amount of support in place to help the franchisee’s such as your own personal account manager.  The downside is that you will find that you will pay increased prices on some products as part of the franchise and in turn reduce your bottom line an example of this is pub franchising where licensee are tied for the majority of their beer products and at the mercy of the suppliers when price increases are put into effect.

The theory behind a franchise is you can then sell the business and allow for good will increasing your asking price and in turn your profit.