5 Quick business-buying tips


With an increased working age and uncertain employment, more people are looking to be their own boss.

Typically buying an established business will sell for a premium because it has:

customer base + ongoing contracts + established market place position = intangible goodwill

The key things to look for when buying an existing business:

  1. Sustainable return : It needs enough ‘super’ or ‘surplus’ profit to repay the purchase fee after deducting a fair wage for the new owner’s working input
  2. Growth potential:   The business has genuine potential that’s easy to exploit. It it was really easy to grow, why hasn’t the owner already grown the business?
  3. Specialist skills : In addition to financials, consider the prospective owner’s personal knowledge or expertise to run the business. Will you need a management team?
  4. External influences: ensure that these will not adversely affect ongoing sustainability. This is largely outside the control of either party but requires due diligence.
  5. Fair price : verify that the business is on sale at the right price – get it independently valued.

Remember, both sides of a business transfer rarely agree on a a true and fair valuation figure . In this economic climate also watch out for:

  • Market conditions differing from sector to sector
  • Demographics/competition differing for local (fish&chip shop) & international (online travel agent)
  • Any regulation, red tape or litigation issues for any business for sale

Read more about how to buy a business here.