What to Look out for When Buying a Business

Are you considering investing in a new business? If so, there’s no doubt it can be an exciting time but also one you should take seriously so as not to make an incorrect choice.

With around 5.6 million private sector businesses currently active in the UK, there are certainly lots of companies to select from if you are looking to purchase an established organisation. As experts in all things business accounting, at Hysons Chartered Accountants, we want to help investors make wise decisions. 

Keep reading to learn exactly what should be looked for when buying a business. 

What Are the Risks of Not Properly Assessing Businesses When Considering Making a Purchase?

Although we understand an esteemed business owner will likely have experience in turning sinking ships into floating success stories, it’s important to consider the risks of investing in a bad opportunity. 

This includes issues integrating existing company structures, loss of financial investment, slow ROI and inherited staffing issues. All of these factors can mean an investment opportunity is over long before it had a chance to begin,

Factors to Look for When Buying a Business

Whilst there are of course risks to consider, buying a business is an exciting and successful opportunity for many. If you want to reduce the chance of making a costly mistake, below are the elements to look for when choosing a viable business purchase:

Sale Reason

Firstly, an investor should always assess the reason for the company being up for sale. Just like buying a car, you want to ensure everything is in strong working order or that an easy fix for current issues is possible.

Speaking with the current owner and performing a detailed evaluation of operations and market position is essential. If reasons for sale include wanting to retire or moving to a new project, that could indicate a positive opportunity.

Financial Position

The most important factor in our eyes is the current financial position of a business. 

This should include contracts, liabilities, current assets and inventory, previous accounts, insurance and projected activity. Current owners should be freely willing to share any requested information and answer any questions you may have.

Future Opportunities

In addition to ensuring a business is displaying an appealing performance at present, looking to the future is also essential. Investors should ensure the market has projected growth, that the financial opportunities will provide an ROI, and that there is room to scale operations. 

A financial planner will be able to advise on how feasible these opportunities are given past trends.

Reputation

Lastly, assessing the current brand image is essential. 

Reputation is proven to have a direct correlation with financial performance, so understanding how consumers, suppliers, and competitors regard a business is vital. This can be done by looking at digital platforms, conducting surveys and looking at data such as domain authority and traffic analytics.

How Can Hysons Chartered Accountants Support When Buying a Business?

With this list of factors, better business investments can be easier to make. However, going it alone can be another way to increase risk. 

By working with our team of experts, making a solid business purchase is a simple task. To learn more about our business planning and analysis services, get in touch.