If choosing wisely, there can be many good reasons why buying an existing business could be the right move. Remember though, that it is "inherited" from the previous owner, and awareness of every aspect of the business is vital.

Advantages
1. A business plan and marketing method should already be in place.
2. The foundation work in getting the business up and running will already have been done.
3. Any "teething" problems will have been discovered and solved.
4. Finance should be easier to obtain, courtesy of a proven business record.
5. A market for the product or service will have already been demonstrated.
6. The business will have established customers, a reliable income, a reputation to capitalise and build upon and a useful network of contacts.
7. The experience of current employees will prove valuable.

Disadvantages
1. A large investment is required, along with professional fees for solicitors, surveyors, accountants etc.
2. A neglected business will require substantial investment (over and above the purchase price) if it is to succeed.
3. Outstanding contracts will need to be honoured or renewed.
4. The present owner must have a reason for selling. Try to determine their thoughts.
5. Staff morale may be low due to poor management.

The Right Type of Business
Ideally, any business needs to fit individual skills, lifestyle and aspirations. List the important points. It may be useful to consider:
Commitment
Preparation for the hard work involved, along with a substantial capital investment is vital to success.
Strengths
Ensure any business opportunity will make use of your specific skills and experience.
Expectations
Be certain that profit levels will accommodate your needs.
Business Sector
An in-depth knowledge of a business area allows objective comparison of different businesses. Talk to people already in similar businesses. Find out how to comply with all the regulations and licences that apply to your prospective business.
Location
Don't restrict the search to the local area. Some businesses can be easily relocated.

Where to look?
Many national and local newspapers carry adverts for businesses and business premises for sale.
You can get contact details for most newspapers, magazines and trade journals from press directories available at your local library. Some magazines, many of them with their own websites, specialise in buying and selling. Other websites also offer databases of business transfer agents. These are experts in valuing, marketing and selling businesses. They can help you find the right business and can put you in touch with possible sources of finance. When looking for a transfer agent ensure they are members of the National Association of Estate Agents (NAEA). NAEA members are subject to a code of conduct and membership demonstrates that they possess the necessary professional skills, knowledge and experience.
Don't forget word of mouth. Ask around among trade contacts, business associates, and at exhibitions and conferences.

Ensure A Business is Worth Buying
Having done your research, you should verify the information you have been given about your prospective new business. A period is allowed for you to access its books and records. This is known as due diligence. It should give you a realistic picture of how the business is performing now, and how it is likely to perform in the future.

When to begin
Don't start due diligence until you've agreed a price and terms with the seller. For a down payment, they may agree to take the business off the market during your investigation.
The investigation period is negotiable - but most small businesses need at least three to four weeks.

Where to get Help
Detailed company information is available at the Companies House website (for Northern Ireland the Companies Registry website). Ideally, though accountants and solicitors should be involved in identifying risk areas.

Due diligence is about much more than the finances of a business. This period should provide knowledge of what you are getting into, what needs to be fixed, what it will cost to fix, and if you are the right person to take on this business.
Key areas to cover are:
  • Employment terms and conditions.
  • Outstanding litigation.
  • Major contracts and orders.
  • IT systems and other technology.
  • Environmental issues.
  • Commercial management including customer service, research and development, and marketing.
Information Sources
Dig as deeply as you can and use whatever documents are available. For instance, if you're looking at employee records, you could check out:
  • Payroll records.
  • Staff files.
  • Copies of pension and profit-sharing plans.
  • Employment contracts.
  • Staff manual.
  • Union contracts.
A Step-by-Step Approach
An organised approach will help you find and acquire the right business.

1. Professional Advice
Professional help is invaluable as you go through the negotiation, valuation and purchase process.

2. Research
Research the sector you're interested in, including the best time to buy, and shortlist two or three businesses.

3. Viewing and valuation
Be discreet. The owner may not want staff to know they are selling, but be thorough and record key findings.

4. Finance
Lenders generally require:
  • Details of the business/sales particulars.
  • Accounts for the last three years.
  • Financial projections, if no accounts are available.
  • Details of your personal assets and liabilities.
5. Formal Offer
If you make your initial offer by phone, follow this up in writing. Head your letter "Subject to Contract" and include this phrase in all written communication.

6. Negotiation
Before completing the sale, try to negotiate an overlap period so you have time to become familiar with the business before taking over. Record all the main points agreed.You and your solicitor need to verify the information on which you have based your offer. If you're buying premises, you may want to arrange an independent survey and valuation, even if a lender is also carrying out their own survey and valuation at your expense. .

7. Completion
Even after you reach an agreement on the price and terms of sale, the deal could still fall through. You have to meet certain conditions of sale to complete, including:
  • Verification of financial statements.
  • Transfer of leases.
  • Transfer of contracts/licences.
  • Transfer of finance.
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