If you’re looking to buy a business, you’ll be keen to get the best deal possible. No-one wants to feel they’ve paid too much or that they’ve underestimated the time it will take to earn a return on their investment.
So, how can you ensure you’ve got the best bang for your buck?
Get the timing right
It’s best if you clarify your goals at an early stage – are you looking for a long-term investment or something you can flip after a few years? Either way, do your research before taking the plunge. To get best value, you should be aiming to buy a business at its ‘sweet spot’ – early enough that it’s shown promise but well before it’s reached peak potential. This is where you’ll be rewarded for your knowledge – if you learn as much as you can about the niche you’ve chosen, you’ll be better placed to gauge movement in the market and be able to act accordingly.
Spot a motivated seller
It’s usually possible to get a better deal on a business if the vendor has a pressing reason to sell. It could be that they’re looking to retire, relocate to a new area or are having to split assets following a divorce or other life event. You can give yourself an advantage by ensuring all your paperwork and financing is in place for a quick transaction. If the vendor knows you’re ready for a swift exchange of contracts, you could secure a considerable discount on a business’s market price.
Consider a failing business
If a business has a sound trading history but is experiencing problems due to cash-flow or management issues, it could provide the perfect opportunity for a seasoned buyer to pick up a bargain and restore it to profitability. You’re less likely to encounter stiff competition from other interested parties and you should be able to negotiate a heavily discounted price. Make sure you have everything you need to make an informed decision and that you have the nous – and the budget – to fix what’s wrong.
Do your homework
Only by knowing all the ins and outs of your prospective business can you be confident of being able to negotiate the best deal. Commission a trusted team of experts and go through business records, accounts and sales history with a fine-tooth comb. If you’re methodical with the due diligence process, you’re more likely to spot areas of weakness that will give you a bargaining tool.
Related: How to buy a business [Guides]