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Things to look for when buying a business

Buying a business is not as straightforward as simply identifying the sector you wish to buy into and then watching the money roll in. There are a myriad checks that should be carried out as well as the more practical decisions concerning suitability of the business and its long terms viability.

Of the most immediate concern would be the state of the company’s finances.

It is of intrinsic importance that a clear picture is sought before any further steps are taken.

In this, it is important to be diligent in your approach warns Greg Moore, a business consultant based in Dubai. ‘When establishing the basic financial principles of the business it is important to have access to accounts over an extended period, not just over the last quarter but go back much further. It is possible some people may massage their accounts.’

Of almost equal importance is to ask around and build up a background of the business. As with most walks of life, reputation will play a very important part in a business and it is necessary to ensure the business you are interested in acquiring is seen in a positive light.

‘Ask around, seek out a background, establish a reputation as it is THE most important thing in business. Does it pay on time? How does it do business? These are the sort of questions that should be sought out,’ said Moore.

The sort of questions will obviously be dictated by the type of business. If it was a PR firm for example, as a people business it would be pertinent to establish the sort of people working within the firm; what motivates them, will they be happy to see a new owner, make sure they are performing to an acceptable standard and will you be happy with such a workforce. Quite often new owners will have to work with existing staff to assure them over possible changes.

Background checks

In the case of a service sector like a restaurant, then again it would be a case of ascertaining the quality of the business, the level of turnover, popularity and how it markets itself. Then there are more practical decisions to consider. Is its location any good? Are there plans to change the road or impact on access? Are there any planned laws or regulation changes that could affect the business?

Other questions a buyer should ask is whether they can run this business? Does the training, background and skills stack up?

‘At the end of the day, what should concern you in the short-term is the financial status and reputation of the business you are looking to buy. If these two appear in order then there will be opportunities to explore further and maybe make an investment decision,’ said Moore.

As long as you have done your due diligence, then the opportunities for entrepreneurs looking to buy a business are great, it is after all done thousands of times a year. Skip this process, or fail to explore all angles of the business and you may well pay dearly for your laziness.

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