When I am asked to help a buyer who is looking at buying a business, the meeting is usually me asking a long series of questions. Many of the questions end up being questions which the buyer should be asking the seller in relation to the business and their reason for selling.

At the end of the meeting with the buyer, they will often say “Thank you, now I know what I need to know and what questions I should ask”. Then I sit and wonder why they hadn’t thought of these seemingly obvious questions before. But of course, if you haven’t been through the process of buying a business before – then you don’t necessarily know what you need to know!

It’s all about asking the right questions to get the right information to be able to make the right decision FOR YOU! The trick is knowing what information you need!

There are some basic areas that you need to explore as a potential buyer and therefore areas as a seller which you need to have covered. These are;

(1) Why is the seller selling? (Especially when they are telling you what an excellent business it is.)
(2) Financial aspects of the business. The seller should be able to provide you with ‘year to date’ figures and finalised accounts to the end of the last financial year. If they can’t why not?
(3) How much should I spend on a business? It’s not just about price but also working capital etc.
(4) Non financial aspects of the business. Just a few of the things are lease arrangements, staffing, systems, barriers to entry, seller hand over period, seller not competing… and many more,.
(5) Questions to ask yourself. Why do I want to own a business and why this one? Just for starters.

If you are thinking of buying a business then plan and prepare before you even start looking.

Buying a business is a major decision for most people. Unlike buying a home, where if you end up not liking it you can always sell it again and get something for your money. If you buy a business and it all goes pear shaped, you could end up with nothing to sell and lose everything – including your home! Don’t take the chance! Seek good advice before proceeding – CLICK HERE.

Having said all that, if you buy the right business for you and for all the right reasons it could be the best investment you ever made!

All the best in your decision making – John Denton

As much as we would like to sometimes, we just cannot change history.

Although, some business owners still try to turn the clock back!

What do I mean by that? Well, every day in business we are creating a history of the business’ performance – reflected in the numbers. Every single thing that happens in the business is there for everyone to see – including potential buyers of the business. And that’s why I keep emphasising to business owners “be aware of the history you are creating. Know your numbers!”

One of my mantras is “Keep your financials clean, up to date and the ‘right’ numbers going up!”

A business, like shares, is much more attractive when there is a history of the numbers going up! The most important numbers are ‘adjusted net profit’ to the owner, turnover, and gross profit. The longer they have been going up the better but at least over the last three years. Steady growth is preferred by most buyers not sudden increases or decreases. Consistency is very important and spread over a good diverse mix of clients. It can take years to get to this state.

One bad number can make a big difference in the value of a business and can put buyers off – big time! Many businesses I get to look at simply do not have a well constructed process for recording and reviewing the numbers. Want to know more? Attend one of my short workshops.

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This is why every business owner who has any ambition at all to sell their business one day, and cash out with a good sale, needs to be planning and preparing their business ready for sale EVERY DAY. Build an asset not just a job for the owner.

A business that is ready for sale will be much easier to manage, run without the owner, be much more successful and will attract buyers. This is the situation you want to be in so that you can have options to sell for the price you want, when you want to. You should be in control of the whole process.

There are many more areas that need to be considered in addition to the numbers. For example how well you structure and record the numbers is also critical. Make it easy for a buyer (and yourself) to see what is happening in the business. Keep your eye on the ball all the time.

In future posts I’ll be covering the other areas but if you want to fast track your learning on the “business ready for sale front” consider attending one of my half day seminars on the topic. To get the details

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Buy A Business – What You Need To Know

You Can’t Change History!

As much as we would like to sometimes, we just cannot change history.

Although, some business owners still try to turn the clock back!

Testimonials

From Ros Worth – Department of Regional Development

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