Buying A Business UK | A Business Buying Guide
Thinking of buying a UK business? Read our guide to learn the three key stages in the buying process & get actionable tips on navigating them.
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How To Buy a Business in UK: 3 Most Important Stages
Buying a business is a complex, multi-step process that needs careful consideration.
Every business comes with specific challenges during the buying process. This means it’s vital you familiarise yourself with the general process, so you can ensure you’re aware of the steps that will take place.
Our guide provides you with a comprehensive resource that lists the three most important stages in buying a business and provides you with tips on how to navigate them.
If you then decide you want to start the process of acquiring a business, you can speak to a business broker or sector expert from Christie & Co to get more sector-specific information.
Stage 1: Before the buying process
Preparation is the first stage in buying a business. You need to complete a range of tasks to establish if you have the ability to run a company, if there’s a market for your venture and if the right business is available for you to buy.
These are the six steps of the preparation stage of buying a business:
- Review your own position
- Careful market research
- Thorough financial understanding
- Determining the right choice of location
- Finding the right business property
- Viewing businesses
We’ve covered each of these in detail below.
Review your own position
Whether you’re interested in owning small businesses or larger companies, the first (and perhaps most important) step in the buying process is to establish if you’re best suited to running a company. Why? Because there’s no point in purchasing a company if you don’t have the skill, will or materials to run one.
You need to ask yourself some tough questions, such as:
- Do I have the ability, commitment and skill to run a business?
- Do I have the necessary capital to purchase a company?
- Do I know how much I need to earn from the venture?
You need positive and unanimous answers to these questions. Any grey areas could put you in a position where you buy a business but aren’t able to see it through. This may result in you experiencing personal and financial stress.
Careful market research
One of the most important things to consider when buying a business is diligent market research.
For a business to thrive, it has to meet the needs of its target audience and it has to occupy a carefully thought-out position in its market.
You need to begin by carrying out research to understand the market, customers, and their needs. It’s crucial that you ascertain whether or not there is enough demand for the product or service – and be realistic about it.
It might be a good idea for you to speak to a market research specialist about the business sector you’re thinking of buying in.
A specialist can review your plans and consider them against the market, helping you establish if there’s an audience for the business you want to buy.
Christie & Co has a dedicated team of specialists who can provide informed advice, market appraisals and analysis of business trends to help you make the right commercial decision.
Talk to Christie & Co's agency services today if you want a specialist to carry out careful market research for your business venture.
Thorough financial understanding
Successful business owners go to great lengths to establish a deep understanding of the financial side of their businesses and prospective businesses.
It’s essential to assess the finances involved in acquiring and operating a business before you even consider making an offer for it. This is to ensure that the business will be able to keep afloat in the first few months of your ownership and then turn a profit in the long term.
Speaking to a finance expert can give you a thorough understanding of the maths involved in acquiring and operating a business.
Our partners at Christie Finance are on hand to provide the commercial mortgage advice to help you secure the business you want.
Determining the right choice of location
For many businesses, location is key. A successful business meets the needs of its local market and is located in a place where its target audience can access it easily.
Competition is one of the key considerations when choosing a location for your business. If there are several other companies doing exactly what you intend to do then your business may struggle to compete.
A top tip is to locate your business in a place where there is a clear gap in the market, or surplus demand for the service you are providing.
Finding the right business property
Choosing the best property is vital when you’re buying a business.
You can change a lot about a business but moving the location or making significant amendments to the property are among the most stressful. Pick the right property, so you don’t get stuck with an asset that doesn’t deliver the results you want.
Preparation is crucial because you need to demonstrate to finance lenders that you’re proposing a sound business venture, one that’s evidence-based and sensibly planned.
Christie & Co can give you a clear idea of the companies available. Our business search page allows you to search by business type and location. This will give you a list of suitable options for the area you’re interested in.
We can also provide you with information about businesses. Our local experts are on hand to help you research the region and its suitability and our agents can conduct a search on your behalf.
If you carry out the business search yourself then it must be methodical, robust and clear. These are the things your lender will demand from you and if you can’t deliver them then you might not get the finance you need to buy your business.
Viewing businesses might be the most exciting part of the process. It’s where things start to get real and when you can get a clear picture of what your venture will look like.
You should think about the following five things when viewing businesses:
- Locality: The area where your business is based and your family potentially will be living. Think about schools, transport, amenities, culture, climate, etc.
- Location: The location of a business is of vital importance to its success. Think about competitors, local trading conditions, average local house prices, etc…
- Tenure: Whether the business is freehold or leasehold. Think about both the long term and the short term and how much you can afford.
- Building: The physical state of the building which contains the business, and on which it depends. Think about its condition, any repairs needed and any alterations required to meet trading regulations or for expansion, such as parking and access.
- Business: The financial state of the business. Think about how the accounts reflect its performance and compare this with similar businesses.
Make sure you record key findings that come from this process, so you can be one of the informed business buyers who makes a sensible decision. Not one of the unprepared buyers who makes a (potentially) catastrophic purchase.
Once you have a specific business in mind, you can get further information about your prospective venture by adopting the following tactics:
- Using the business as a customer
- Sending a friend to use the business as a customer
- Watching the business at various times of the day to see how many customers go in
- Checking on the weekend trade, particularly at pubs, restaurants and hotels
- Talking subtly to competitors
When you get to the point where you’re preparing to visit the business, ask yourself these questions:
- Are you sure you want to own this business?
- What are its advantages and disadvantages?
- Would you want to be a customer/client of this business?
- What other businesses of this type have been for sale recently? Have they sold?
- Why is this business on the market?
When you do visit the business, you can ask the current owners these questions:
- How long have they owned the business?
- What was the business like before they bought it?
Stage 2: During the buying process
Purchasing is the second stage in buying a business. You have a variety of tasks you need to complete to get from a position where you’re determining how much a business is worth to one where you’ve completed the purchase.
These are the six steps of the purchase stage of buying a business:
- Value the business
- Arrange finance
- Arrange legal representation
- Make a formal offer
- Due diligence
- Complete the purchase
We’ve explained all of these in detail below.
Value the business
You’ll have completed some of the important work that goes into valuing a business as part of your preparation for buying one. This includes the five stages of viewing a business:
But there’s some precise information you may not have (or might not have organised properly) that you need to get a realistic valuation of the business. This information includes:
- Historical and present performance: This covers sales, turnover and profit. You can get a significant amount of this information from Companies House.
- Future projections: This is how successful the business is predicted to be. You may need to speak to an accountant to get the most accurate assessment for the future.
- Financial situation: This accounts for the company’s assets, cashflow, expenses and debts. A combination of details from Companies House can help you get this information.
- Litigation issues: This details any legal proceedings the business is involved in. You can find out if the company has any litigation issues by speaking to a solicitor.
- Why the business is being sold: This concerns the vendor’s reasons for selling. Ask them directly and see if you can get a clear understanding from their response.
- Upcoming regulatory changes: This is about knowing if the government is making changes to the industry sector the business is in. You can find this information by checking the web pages of the appropriate government department(s).
- Intellectual property: This concerns any intellectual property owned by the business. This is something that you can establish by speaking to the existing owners.
Your own research can provide you with a lot of the information needed to get an accurate valuation of the business you want to buy. However, some details will require the assistance of a professional.
It’s likely that everyone interested in buying a business would like to do so without finance. But the reality is that most people don’t have the personal assets to enable this and will need to arrange finance to purchase a business.
Christie & Co can help you to get the best available finance for your venture. We can help you get a commercial mortgage for the following types of business:
- Childcare and education
Speak to one of our experts today to discover how we can help you get the finance you need to buy the business of your dreams.
Arrange legal representation
Arranging legal representation is something you shouldn’t overlook when you’re buying a business.
Purchasing a business is a complicated process that can throw up a wide variety of legal due diligence issues.
Investing in legal advice and representation gives you the peace of mind that comes from knowing a trained legal adviser is accurately handling these issues.
Make a formal offer
Making a formal offer is when buying a business really starts to feel real for many people. You’ve got planning, finance and representation in place. Now you just need to become the business owner.
An important thing to know before submitting your offer is that the asking price for a business is typically negotiable. While the seller may well push back on your initial offer, it might not hurt to test the waters by offering a lower amount than the asking price.
When making your offer, be prepared to reason why you think your offer should be accepted. Highlight any incentives for the seller, such as if you’re prepared to move through the process quickly.
You can also offer more than the asking price to secure the business if your projected numbers show that you’re likely to recuperate the costs fast.
You can sometimes find yourself in a bidding war with other buyers and it’s important to not get caught up in the thrill of it all. Decide on the largest amount you’re prepared to pay (referring back to your financial calculations again) and stick to it.
When you reach an agreement with the seller regarding the basic price, structure and terms of the transaction, you typically enter into what is known as a ‘heads of terms’ agreement. This document means that the parties have agreed to the price and basic terms and principles of the transaction.
Due diligence is a vital part of the business buying process as the buying process doesn’t end at the offer acceptance stage.
Due diligence is your chance to investigate the business you’re buying in even more detail, with professional help if you need it.
At this stage, you can look into the business’s accounts, VAT returns, employment contracts, and capital equipment leases.
We recommend professional advice as a necessity during this step. Seek advice to ensure you’re looking at all the right details and assessing them within the best parameters.
Once due diligence has been completed and you’re happy with all the information, then you’re ready to proceed to the next steps.
Complete the purchase
The final step in completing your purchase is sealing and signing the sales agreement.
A sales agreement will outline and finalise all the previous ‘heads of terms’ discussed during the due diligence stage, alongside any changes.
You may wish to consult with a professional at this stage too, ensuring that all details and changes correspond to what has been previously discussed.
Look out for any vaguely-worded terms that you may need further clarification on.
Once signed, you’ll need to pay the seller within the agreed timescale, as stipulated in the contract.
This is the final step that officially makes you a new business owner.
Stage 3: After the buying process
Once you’ve completed the purchase and received the necessary paperwork (such as the financial statements transfer) you become a business owner.
But buying a business doesn’t stop once you become the owner. You then enter into the third stage of the buying process — the post-purchase phase.
These are the four steps of the post-purchase stage of buying a business:
- Audit the existing practices and processes
- Speak to any existing staff members
- Assess the company culture
- Review regularly
We’ve examined each of these in detail below.
Audit the existing practices and processes
When you’re buying a business you’re not only purchasing a physical asset. You’re also acquiring a set of practices and processes, ones that have put the business in its present state — for better or for worse.
Auditing the practices and processes of a business gives you a chance to see what’s working and what isn’t working. These are some of the things you should consider in your audit:
- Any existing suppliers
- Any present contracts
- Any current staff
The final part of the audit is something that leads into another key part of the post-purchase stage — speaking to any existing members of staff.
Speak to any existing staff members
Not all businesses will come with existing staff members as part of the package. However, if yours does then you’ll need to take time to talk to your employees and get to know them. Why? Because the success of your business will depend on them.
Arrange individual meetings with your staff.
Ask them directly what they like about the business and what they dislike. What they think has worked before and what they think hasn’t worked before. Understand their hopes and fears, so you can manage them effectively.
Set up a company meeting with all of your employees.
Give them an opportunity to contribute to the direction of your business, so you can get their full investment in the direction of your business and the company culture they want to see.
This leads us into another key component of the post-purchase part of acquiring a business —- assessing the company culture.
Assess the company culture
Some companies have great cultures. Others have less than impressive cultures. It’s your job to ensure your business has a brilliant culture, one your staff are proud to represent and that your customers are willing to spend their money on.
How you go about ensuring your business has a great culture depends on your definition of what great looks like. However, there are a few things that you may want to consider when determining your definition:
- Building social connections
- Promoting wellness
- Delivering meaning
- Producing goals
Running a successful business is an ongoing process. Whether you own one, two or three businesses, you never stop working, learning and improving your operations. Because as soon as you stand still then you start going backwards in slow motion.
The ongoing nature of managing a business means you should review your processes on a regular basis, so you can spot any opportunities for improvement.
Having an annual review is essential but the more frequently you can assess your operations the better it will be.
You should also consider any key seasonal factors in your reviews. For example, if you’re buying a hotel on the coast then you should conduct reviews with enough time to account for the sorts of customers you get in summer and those who arrive during the winter.
Tips for buying specific businesses
Christie & Co can help you buy the business of your dreams. We offer a variety of independent services to help you buy the exact business you want. These are the businesses we can help you purchase:
- Care business
- Childcare and education business
- Dental business
- GP surgery business
- Hotel business
- Leisure business
- Pharmacy business
- Pub business
- Restaurant business
- Retail business
Click the links below to learn more about buying the businesses we’ve listed above.
Tips for buying a care business
Learn more about buying a care business
Tips for buying a childcare and education business
Learn more about buying a childcare and education business
Tips for buying a dental business
Learn more about buying a dental business
Tips for buying a GP surgery business
Learn more about buying a GP Surgery business
Tips for buying a hotel business
Learn more about buying a hotel business
Tips for buying a leisure business
Learn more about buying a leisure business
Tips for buying a pharmacy business
Learn more about buying a pharmacy business
Tips for buying a pub business
Learn more about buying a pub business
Tips for buying a restaurant business
Learn more about buying a restaurant business
Tips for buying a retail business
Learn more about buying a retail business
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