Buying an existing business can have advantages - regular customers, established brand, known suppliers, trained staff and established processes.
There can also be disadvantages, depending on the business that you are considering buying. These could include the high cost of the initial investment, a bad reputation, high stock levels, obsolete products and potential costly ‘unknowns’.
It is also important to look at whether the business profits can support your personal circumstances and the loan repayments if you intend applying for a loan.
It is critical to do your research and due diligence.
Before you commit to buying a business, you should have the following information as a minimum:
- Purchase price, including stamp duty and legal costs.
- List of items included in the purchase price e.g. Plant and Equipment, Stock, Goodwill, Asset list.
- Historical business financial reports such as Profit & Loss / Balance Sheet for the last 3 years.
- How much do you need to borrow?