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.
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.
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.