ABBA Group’s tips for buying a business.

Posted on 23 February 2016

Over many years as a business broker, I have seen clients make wrong decisions because they were too involved emotionally or they became frustrated during the buying process.

The best deals are done when all parties are relaxed and not under pressure. Appointing an experienced buyer’s agent who is on your side can make the entire process run smoothly. Here are my tips for buying a business:

  • Buy in gloom and sell in boom – This is obvious but time and again, I have seen people overpay by buying a business at the peak of its cycle or getting too emotionally involved. You do not want to buy a business that is at its peak because you will be paying a premium price which may not be achievable if you decide to sell.
  • There’s no place for emotions in business – Business and emotions don’t mix and if they do, the results are usually unfavourable. Emotions can cloud your decision making and may result in you overpaying or in you agreeing to conditions which are not in your best interests. A rational mind and professional approach are your best weapons when buying a business.
  • Appoint a professional – Seeking help from an expert, who is not as emotionally attached to the outcome, helps you balance your thoughts with neutral feedback. You’re making a large investment and the advice, experience and knowledge of an expert can be invaluable. Opinions from key advisors such as accountants, solicitors and business valuers will help guide you in the right direction.
  • Paying market value – Appoint someone who knows the ins and outs of how to value a business, such as a professional business valuer. A business valuer should consider comparable recent sales and perform a proper due diligence process. This valuation will be a guide to ensure that you pay market value and not over.
  • Talk to people – Keeping in mind the vendor’s desire for confidentiality, it is still important to reach out to existing customers, competitors, suppliers and anyone else who deals with the business. These people are well placed to give you insights into how the business is doing. This is another form of due diligence and is a key part of the business buying process. Relying solely on the numbers can be misleading because as we all know, small business sellers are notorious for “massaging” them.

Buying a business is one of the most important decisions you are likely to make in your life. It involves a substantial financial commitment and will also impact on your personal life. The returns however can be huge, offering financial security and a comfortable lifestyle. The ABBA Group can guide you through the buying process so that you have the right information to make the right decisions.