Three Things to Consider When Looking for a Business for Sale
If you are looking for a business for sale in South Africa, you most probably already have a price range in mind. Of course, you will want to pay the lowest possible price, but keep in mind that if it is a huge bargain, there is most probably a reason for it. Buying a sinking ship is not recommended, unless you have substantial funds and a solid business plan to put a plug in the leaking hole. But in general, if the captain is ready to jump ship, maybe you should stay clear of the boat.
Finding a suitable business for sale starts with finding a reputable business broker. You have one online site to search through and if you do not immediately find something that suits your needs, you can always request that the broker notify you once there is a business for sale that matches your requirements.
Any substantial investment should be carefully considered. Below are three factors to consider.
Analyse the financial records of the business for sale. If possible, analyse at least the last two years’ records. If the business is still in its infancy phase, then the records from start-up to date must be analysed. Be careful if the business does not have any type of financials, such as financial statements, management accounts, or even bank statements, to verify the figures. If there are no financial records to conduct your due diligence, it would mean the business could not possibly be 100% tax compliant, because it should at least have balance sheets, tax returns, income and expenditure records, details about purchases and sales, etc. You will use the financial records to determine the financial health of the business.
Reason for Selling
If the business for sale has been around for 20 or more years, it makes sense if the seller wants to move on to something new or perhaps retire. Poor health is also a valid reason. Divorce and emigration are other common reasons. You need to find out the real reason for selling. In this instance, working with an experienced business broker also helps, as the broker will already have assessed the true reason for selling.
Who Is the Captain of the Boat?
A business for sale advertisement may state that the business has existing contracts, but you need to know whether the contracts can be renewed. If it is a photography business for instance, will the clients still make use of the business if there is another photographer? If it is a hair salon business, will the customers still support the business even if the leading stylist is no longer there? You need to know whether you can continue with the business or whether its name and success are tied to the owner in such a way that it might cause immediate failure if that person is no longer involved.
The above are only three of the factors to consider when browsing for a business for sale. Many more factors must be considered. Speak to our experienced team about suitable and successful businesses. They will help you make an informed buying decision.