We have been involved in countless sales and purchases of businesses over many years. The financial analysis and objective “on-paper” review of a business is relatively straight forward. In my experience, there are some non-financial issues that warrant as much or more attention when buying a business. Here I share some commonalities of business purchases that were set up for success.
1. Time Should Be On Your Side
Patience will be one of your most valuable assets. The most successful new business owners have been planning well in advance of the purchase. Think ahead to being a business owner when the discipline of careful, well-timed plans will set you up for success.
2. Get the Expertise Before You Buy the Business
Recognise your own expertise and skill, and if possible find a business that uses it. If you want to change industries, then upskill yourself working for someone else in that industry before you buy a business. You may be very capable of learning the job, but it is unrealistic to expect to be able to do it after you have purchased a business. Once that business is yours, the meter is running and you’ll have enough to do to make it successful without having to rapidly gain new industry knowledge or skills.
3. Be Objective
While passion for your business is a must, you need to retain an objective point of view at critical decision points. When you find what you deem the right business, take professional advice – and listen to it! Often people are so engaged in the process they are looking at the business through rose coloured glasses. They only want their adviser to tell them why they should proceed rather than hear the pitfalls. Be prepared to let one or more business opportunities pass you by until you find the right one.
4. Insure Yourself Beforehand
A simple practicality – obtain income protection insurance before you leave employed work. It will be very difficult to gain insurance once you are self-employed.
5. Buy ‘Real World’ not ‘Blue Sky’
When assessing a business and its value, ensure that you are paying for real world current performance of the business. Don’t allow yourself to pay more than the business is worth based on blue sky potential of growth.
These are just a few of many non-financial aspects that come into play when considering the purchase of a business. Give us a call on (02) 9908 9888 for more advice on buying a business.