Top Tips
Opportunity Knocks: The Ins and Outs of Buying a Business
Buying a business can represent a huge opportunity for budding
entrepreneurs, however it is not risk free - without adequate research,
planning and consideration, the process of acquiring a firm can be fraught
with difficulties.
In order to help budding entrepreneurs avoid some of the pitfalls
associated with buying a business, David Robertson, Chief Executive of
leading finance firm Bibby Financial Services has developed a series of top
tips.
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Do your homework - Get a feel for the business by
researching its market, the main competitors and visiting the business to
meet the current owner.
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Get into the detail - Undertake detailed due diligence.
Seek out customer's opinions, ask suppliers for their views, review
the balance sheet and audit the workforce.
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Better safe than sorry - Make sure that the business has
no major problems before you make a firm offer. Speak to industry experts
to determine prospective demand as well as price and margin prospects.
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Seek expert advice - Choose advisers with appropriate
expertise. You may need specialists in accounting, tax and legal due
diligence at different stages of the buying process.
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Making an offer - Calculate your initial offer and your
maximum offer taking into account your initial valuation, the
seller's objectives and what competition you are up against.
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Set out your stall - The "Heads of Terms"
agreement sets out the main terms of the sale, the way payment is to be
structured, any preconditions and what warranties and indemnities will be
provided by the seller.
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It's good to talk - Keep the dialogue going with the
seller, even if the going gets tough. Communicate at all stages of the
buying process and then close the deal.
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After the deal is struck - Quickly announce the change
of ownership in a positive way with the cooperation of the seller. Write
to major customers and suppliers explaining the advantages to them.
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Have an action plan - Determine your key objectives for
the business and then stick to them.
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Keep staff "in the loop" - Communicate with
employees your determination to carry through your action plan. It is
important to make them feel settled and motivated from the outset.
David Robertson, Chief Executive of Bibby Financial Services said:
"Buying a business can be a huge step forward. However, selecting the
right business, in the right industry, at the right time, is critical if
you are going to be successful.
Many prospective buyers waste precious time and resources looking at
endless business listings without any planning. It is vital that
entrepreneurs go into buying a business with their eyes open, having dotted
the "i's" and crossed the "t's" to guard
against falling into the potential pitfalls of buying an unsuitable
business".
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