Looking to buy a business?

Buying an existing business can get you off to a flying start but you will still need to plan for it in the same way as if you were starting a business from scratch.

Avoid doing a random search for a business – make a list of the types of businesses you would like to buy and the skills and qualities you can bring to a business.

As Steve Croucher, senior marketing manager from Daltons Group, which provides listings of business for sales explains, the key advantages of buying an existing business are ease of entry into the market, a track record that can give reassurance to financial backers and existing property, equipment and staff. But bear in mind the possible disadvantages.

“There can be historical problems associated with the business, such as negative goodwill and poor relationships with staff and suppliers. There may also be ownership issues, as buying someone else’s business may reduce the sense of achievement and hence motivation. The key question to ask any business seller is ‘Why are you selling the business?’ “ adds Croucher.

Once you have narrowed down the businesses you are interested in, you can either look at businesses that are actively advertised for sale, or search out a suitable business which you are attracted to, but which the owner might not be considering for sale. Choosing this method may mean you find the business you want, but the downside is that you may not be able to persuade the owner to sell.

Raising the necessary finance to buy an existing business can also be a hurdle. Typically you will need to either use your savings, or turn to your bank for funds – generally a bank will lend up to 30% of the cost.

Another option if you are keen to buy a business is to look at buying into a franchise. According to Marcus Markou, chairman of online directory Businessesforsale.com, banks look more favourably at lending money for a franchise.

“This is because you are buying into an established system of business and effectively taking less risk. In addition, the longer the franchise has been established, the better the chance you have of succeeding with it,” adds Markou.

He believes the average cost of a franchise will set you back between £60,000 and £70,000. The investment may not be that large, but the rewards may not be either. As Steve Croucher points out, control is often an issue as franchisors have considerable influence on how products and services are marketed.

“A classic mistake that many people make is to spend money on a business dream without doing the research or having some experience. A franchise can be a good way for you to ‘cut your teeth’ and to decide whether running your own business is right for you,” affirms Markou.

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Buying a business