The real considerations when buying a business

By James Evans, chartered accountant, Evans Accountants

There are many steps involved and potential pitfalls along the way, so here’s our quick action guide for once you’ve found your target business:

Disengage your heart, engage your brain – and follow your instincts. Don’t get carried away by a dream, it must add up. Remove your rose tinted spectacles!

Work out whether you can really afford the purchase or will you be overstretched. Decide on your budget and what your options are for raising finance. Prepare projections and cash flow forecasts and stress test these for both lower and higher- than- expected trading levels; both have their stresses. Higher sales can mean tighter cash flow, for instance.

Look for transparency from the business seller. You don’t want nasty, costly surprises down the line.

Make sure you have access to the company accounts and management information and make sure it’s up to date, complete and accurate.

Be very wary of a seller’s strong personal attachment to a business. It could impact upon your ability to take over business operations or may distort a vendor’s perception of the value of the business.

Have a solid support structure covering both legal and accounting aspects.

Maintain constant communication between all parties, it will help avoid delays and misunderstandings and make for a smooth and less stressful outcome.Finally the work involved in buying a business shouldn’t be underestimated. It should always be worth putting the time and effort to create a successful and happy outcome.

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