Buying a business is exciting and challenging, an opportunity to fulfil your dreams of being your own boss or to expand the business you have already got running.
Whilst approaching it with excitement is great, just remember once you’ve finally found a suitable business to buy and you’ve managed to shake hands with the seller on a price there’s still lots to do.
At that stage you’ve probably not seen much detailed information about the business you’re buying. Whilst the headlines of turnover and profitability are key the “devil is in the detail”.
Do you really what to be tied into a gas contract at that rate, a HR consultancy agreement for that long and that’s without getting into employee terms and conditions. Are the customers tied into the business, are there any disputes or claims in the background. Due diligence sounds like something someone else should do but it’s vital for you to understand the business you are buying before you have parted with your hard-earned pennies.
The process of gathering information will take longer than you would like, but you can prepare by making sure you have a legal and accounting team ready to help you review the replies when they do come in.
After that then it’s time to produce the purchase agreement, your legal team will handle this for you but it’s worth consulting them on the options (deferred payments, retention’s, completion accounts etc) so that you get the structure right for you. We can also help with tactics so that the process is more mechanical than emotional for the seller, and as a result for you.
My top five tips for buyers are:
1. Get excited about the opportunity but don’t lose sight of the rational for the purchase
2. Make sure your funding is in place.
3. Line up your legal and accounting teams.
4. Allow time for due diligence.
5. Think about tactics and (realistic) timing.
Jas Singh – Corporate Solicitor
0121 726 4999