For some people, buying a business is the way they expand their existing venture, or it could be that they do not want the hard work and risks a start-up causes so see buying someone else’s businesses as an easier option. Whatever the reason, if you are looking to buy a business, you want to pay a fair price and do not want to hand over more cash than is necessary. Of course, the person selling wants as much as they can get too, so here are a few tips to make sure you get a good deal.
Ask to See the Business Pages of Their Tax Return
In the UK, a tax return is made up of several parts with each section being separated from the rest. The return does hold personal information, but you do not need to see that. All you need to see are the pages that relate to the business. This is because it is simple to adjust accounts to whatever someone wants and to make the business look more profitable than it really is. They are unlikely to do that if it will cost them more tax though, so seeing these pages in conjunction with the accounts will give you more peace of mind that the figures are genuine.
Buy What You Know
Buy a business that you know something about if you want a deal that will make you money in the future. For instance, if you are an accountant and see an accountancy practice for sale it might be worth looking at. However, if you are a builder, it would be a waste of your time and money looking to buy the same business. Too many people think they can run businesses they know nothing about and then wonder why they end up failing.
If you understand the business you are considering buying, you are more likely to have some idea about its worth, although you should always seek the advice of professionals to be sure.
Ignore The ‘Cash’
Some people who are selling a business will tell you they do more sales than their accounts show because they do not declare everything. Ignore these comments as they cannot be proven and should not be a consideration when you are agreeing on a price. If they are not honest enough to put all their sales through their books, you have to ask yourself how honest they are being with you.
Ask the Reason
Ask why they are selling the business. If they are retiring because of age or ill health that is a reasonable thing to do. If, however, they do not seem to have a genuine reason for the sale, be very wary of buying the business. Remember that past accounts are history and it is what is happening now that matters. Perhaps spend some time at the premises to see just how busy they are and then you may feel the reason for selling is good enough. If business has dropped off since the last accounts were compiled, this should be reflected in the price you offer.
You need to consider many things when buying a business, but get it right and it could be that your financial future is secured.