Entrepreneurship

Where To Find Businesses For Sale

Cameron Fleming | 14 March 2022 | 2 years ago

Where to find businesses for sale

So your entrepreneurial radar is pinging and you want to onboard a new business. Bravo, you’re getting your mind into a meaty business project.

As with all things, starting at the beginning is important, and that means finding out where to find businesses for sale in the UK and how to buy the business.

Choosing to buy a going-concern versus starting a business journey from square one usually gets you into a viable trading and profit position faster.

Buying a business will require a commitment of time and focus from you to land a trading entity that fits you, your budget and your vision. Starting a business journey from square one is more painful than buying a business, but you pay for the reduction in pain via the cost of purchasing a going concern.

Let’s look at some prudent steps to take when considering the purchase of a business as well as where to find businesses for sale.

The pros and cons of choosing businesses for sale

As with all business ideas, there are pros and cons, and each individual will have a different weighting for each factor listed under these headings.

Your “desire to acquire” might be due to a stockpile of capital that needs an investment vehicle in order to perform. Starting from square one is labour intensive, and you want the capital to earn its living faster than a startup.

Or your wily entrepreneur radar may have picked up an entity that is limping along and you think you can turn it into a Mia Farrow.

Or your current business needs more than organic growth, and acquisition seems like the best route after your careful option comparisons.

Here is an example list of pros and cons for you to work through, which will raise your awareness of some of the important aspects to consider in each business. This is not a template set in stone as the important aspects will be different depending on the actual location. It will, however, help you set up a good foundation of knowledge for your journey into businesses for sale.

The Pros

  • Buying a going concern means a good deal of foundation work has been achieved for you.
  • The entity will have a default financial history, so loan applications might be more successful.
  • There will be an established market segment with existing demand for the company’s offerings.
  • The entity would usually come with an existing client base, steady income and a brand value that can be leveraged.
  • There will most likely be a database of suppliers, collaborators, professionals etc that already have a relationship with the entity.
  • An original business plan is highly likely in place and you can build on that.
  • Marketing methodologies would be documented with info on failed or successful channels to date.
  • The entity’s current staff will most likely be a great source of knowledge, skills and stability that you can leverage.
  • Teething challenges would have been worked through and fewer unknowns would probably exist.

The Cons

  • Capital is usually the biggest challenge. You will need access to a significant amount of capital overall, which will include an upfront large part payment to seal the deal.
  • You will need additional capital, on top of the cost of the business, for vital professional services, e.g. legal, accounting, assessments, etc.
  • It would be prudent to have a buffer capital amount to cover working capital. This would be an ongoing requirement and, as shown by the events of 2020/2021, the bigger buffer, the greater your chances of survival.
  • If the targeted entity is floundering, hence the sale, it may require a capital injection to get it stabilised again. This amount would be on top of the cost of business, but this requirement has probably been factored into the reduction of the sale price.
  • The business might be a beaut and tick many boxes, but ensure you check what outstanding commitments, debts and contracts the business is tied into that were agreed by the previous owner. See if they are renegotiable.
  • Take the time to discreetly and carefully find out why the current owner is selling. You won’t necessarily get the full answer from the owner, but the staff, suppliers and competitors might have information.
  • What is the impact going to be of the existing owner leaving the business? Are they the heart and soul of the business? Should they be kept on until you are fully “infused” into the brand?
  • How do the employees feel about another owner arriving? Or are they glad to see the back of the previous owner, in which case, you might inherit a staff engagement legacy problem?

Factors to be aware of

While finding businesses for sale is a faster route to owning a business than a startup, it does not mean that it is a fast process. Purchasing a business needs:

  • Stamina – more on this later
  • Time commitment (sufficient time)
  • Professional due diligence
  • A stomach for unknowns because the best due diligence is not a wizard’s wand and can’t reveal everything. Some things are only visible or tangible when you are in ‘the thick of things’.
  • H.R. change management should never be underestimated. Win the team over before handover.

In it for the long run

If you are serious about looking for businesses for sale, then it’s crucial you have a conservative time frame expectation. Trying to rush the process could cause you to inherit some nasty surprises, and trying to rush the discussions with the seller could undermine or halt the sale.

It would be prudent to plan for a twelve-month round trip on your business buying journey. Inexperienced buyers might perceive that the roleplayers are dragging their feet, whereas the delays, or turnaround times, are in line with normal business sale timelines.

Sellers, accountants, lawyers, surveyors, assessors and sometimes shareholders all have to be given a chance to review all the details of the deal. And your deal is not going to be the only work on their desk nor at the top of their priority list. Such is life.

The seller of the entity may have emotional or brand value factors they require in the buyer to whom they sell their business. For example, they may want someone who has a proven track record in environmental issues or female-first projects or animal rights.

The existing employees as well as any M-suite members also need to be happy with the buyer unless you intend to replace the entire headcount. Change management takes time. And effort.

You will enjoy the process more if you accept a long-term journey, keep focused, stay upbeat and put your attention on the deal’s details, not the timeline. Make sure you are not the cause of any delays, so have all your documentation, plans, visions and finance ready. And also be prepared for a change of heart from the seller. It is not unheard of that a seller realises they do not want to sell, retire, etc., and calls off the deal.

Choosing the business

When selecting businesses for sale, it can’t be purely on numbers. Just like a job selection, it has to suit your personality, belief system, personal interests, passions as well as skills and aspirations.

In addition, it is important to be clear about how you expect to add value to the business you select. And what do you want to get from the business ultimately?

Here is a short checklist:

  • Skills and training – Will you be able to realise your goals in your shortlisted companies?
  • Funding – What capital do you have to cover the price, the reserve buffer and professional costs? If not, what is your workaround plan?
  • Personal income – What dividends or withdrawals will you need to make from the company profits to meet your personal financial commitments? Will this be sustainable for the company?
  • Work commitment – What degree of work, time, effort and funding does the company need to be successful, and does that suit your expectations?
  • Strengths – Will the company lean on your strengths? If it will lean on your weakness, then look elsewhere. The work must be easy for you, not torture or draining.
Take the time to talk to owners or managers in similar businesses if you are new to this particular type of business. Don’t go in blind, naive or only with your perspective on the business.

And remember, the business doesn’t have to be geographically near you. Not all businesses trade to their direct local community. Look at businesses that could relocate as well.

Channels where businesses are sold

Looking for a seller is a statistical lottery. You need to be looking at as many businesses for sales as possible with the hope of fortuitously being on the right platform, page or location when the ideal business comes up for sale.

These are some of the areas or sale vehicles that might deliver the business you want:

  • Seek out specialist websites – There are thousands of websites within the United Kingdom that advertise businesses for sale. As mentioned above, it may not have to be a ‘local’ business you buy if it can be relocated or it is in the cloud.
  • Enquire amongst your network: friends, family, suppliers, customers, associates, peers. Spread the word in your community ‒ if that is relevant to the type of business you seek. Mention it at your sports club, church, social functions, etc.
  • Research in related trade tabloids or digital platforms. A small business being interviewed may comment about being up for sale because the owner’s other business has taken off, etc. Good deals are found in non-obvious places.
  • Stir the pot – Contact companies who have not put up a ‘for sale’ sign but who you think might be at a good stage for selling, e.g. a restaurant during lockdown.
  • Don’t forget to wade through social media, i.e. Google my business, LinkedIn, Instagram, Twitter, Facebook, etc.
  • Look in local publications.
  • Contact local business networks and spread the word and contact chambers of commerce, trade bodies, e.g. the kitchen renovations guild and trade shows.
  • Listen to business radio shows.
  • While working through the digital options, look at the Google Ads popping up. The algorithms will have been tracking what you are looking for and will soon start targeting you with related adverts.
  • Business brokers – Business owners will often use a business broker to ensure that they prepare their company correctly for sale and to expose them to the widest possible network. Broker firms talk to broker firms, so it won’t only be stock on their books but the stock that their network carries. If you are looking for businesses outside of your local area, this might be especially helpful.

Look at market areas of low interest

You don’t want to be elbowing competing bids out the way when trying to buy a company, nor do you want prices being inflated by trendy interest in a particular market segment.

Look at areas of the market that investors are not interested in currently. Going concerns in this category will be easier to buy as funding will be tougher for them.

Another area to look in is businesses with unexpected, temporary economic pressures put on them and don’t have sufficient bridging finance to make it through to the other side of the economic pressure zone.

You will get better deals, more bang for your buck and can expect a faster business buying timeline. The keyword here is ‘faster’ – not ‘fast’. The timeline will still be long, but it will be faster than the average sale.

Ditched deals

When you are looking for businesses for sale, spread your net wide and don’t narrow down to one choice too quickly, even at the negotiation stage. If you’re wholly focused on one business purchase negotiation and it fails to go through, then you’re back at square one and months “behind schedule”.

Keep your options open and keep looking even while negotiating. Be open to spotting new opportunities and attractive options. Move forward with them so that if one of the options you are currently negotiating with falls through, you are already part of the way down the road with an alternative.

Now it’s time to put on your buying boots, surround yourself with professionals and start the exciting hunt.

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