There are many entrepreneurs in the UK getting ready to use their cash to snap up opportunities as asking prices fall dramatically during the COVID-19 crisis.
Due to the uncertainty of Brexit in the past three years, people have generally held onto cash, and this pandemic has accelerated that. With interest rates at such historic lows, the cash in the bank is seen by entrepreneurs and those looking to start or buy a business as a liability rather than an asset, so it makes sense to put that cash into a business, especially if sellers are willing to reduce their asking prices for a faster sale in these uncertain times.
Decision made to buy a business.
You have decided that you would like to buy a business? There are several reasons why this would be a good idea.
- You have some capital that you want to invest, but you do not have the time to get a new business off the ground.
- You have identified a struggling business that you think you can turn around, for example by bringing your own expertise to it.
- You already run your own business, and want to grow through acquisition, for example of a competitor or supplier.
Bear in mind, before you take the leap there are some important factors that you need to remember. Not every business is an attractive investment proposition, and there are a few things that you need to look out for.
- Buying a business can be an extremely lengthy process. It is vital that you set aside enough time for due diligence.
- It is very likely that any business you are buying will have existing contracts in place, for example with suppliers, and you will likely have to honour or renegotiate these.
- Buying a business will involve paying for professional services such as lawyers and accountants.
- Even with the most extensive due diligence conducted, businesses can have hidden problems that you might not grasp until it is too late.
- If the business you are buying has existing staff, you will need to ensure that you have them on side when the purchase is made otherwise it can be awkward.
· Buying a business can be a sound investment – but you need to make sure that you have considered all these potential problems before you take the leap.
Buying a business without money
Buying a business seems attractive – but what if you do not have the capital to begin with? Luckily, there is a range of alternative finance options that could help you buy a business without the need for money.
- Leverage your new assets. When you acquire the business, you will own its assets. You can use this to your advantage in advance. In some cases, you may be able to approach banks or other lenders and ask them to provide finance against the assets you want to buy. However, make sure that you are clear about any liabilities, and that these are considered when applying for finance.
- Form a co-op. The co-op model is enjoying a recovery now and can be a good way to buy a business with limited funds. By banding together with other investors, you may be able to buy a stake with a significantly lower outlay. Remember, however, that you will need a watertight partnership agreement with the other investing parties.
- Look at franchising. Buying into a franchise can be another great way to buy an existing business infrastructure with limited funds. There are many franchisors across the UK and beyond, and many of these can present a valuable opportunity to plug into a brand that is already proved to be successful.