Buying a Business FAQs

Why are these businesses for sale?

Businesses are sold for many different reasons. A business owner may wish to retire or simply have another business idea that they are looking to pursue. The owner may be of ill health or simply want to travel the world. We will provide you with all the background information on any business in which you are interested.

How do you calculate the value of a business?

There are a many factors to consider  when valuing a business. Included in this are the future profitability of the business, it’s geographical location, the earnings ratio in relation to businesses that are similar, the business’s customer base, annual turnover and of course, the reason the seller wishes to sell.

What am I buying exactly?

This depends on what type of business it is. For example, if it’s a sole trader or partnership, the assets will be the only part on offer. However, if it’s a limited company, you’d be buying the whole business which also includes customer and supplier obligations in the form of both assets and liabilities.

What does SAV mean?

SAV stands for ‘stock at valuation.’ If you’re buying a business that is holding a lot of stock (for example finished products or materials), this will often be included in the sale so that you are able to continue to trade from the moment that you take over the business.

What's the difference between freehold and leasehold?

A freehold business owns its property, whereas a leasehold business either leases or rents the property from where it operates. Should you decide to purchase a freehold business then you will be purchasing the building. This is an asset. If you are buying a leasehold business you will purchase the business, the fixtures and a rental/lease agreement.

How long does it take to purchase a business?

Usually it can take anywhere between six to 12 weeks. Once you have met with the owner and looked over the company’s accounts, we will be able to advise you on what offer to make. You need to then produce the Heads of Terms (this is also referred to as a letter of intent). If the offer is accepted, the solicitors then draft the sale and purchase contracts. When both parties are satisfied, the contracts are exchanged and the purchase is completed.

What is due diligence and why is it necessary?

Due Diligence is essentially a business audit. Once both parties have agreed in principle and the Heads of Terms have been signed, it’s recommended that you use a professional team to carry out comprehensive due diligence on the business for peace of mind and to ensure you are purchasing a sound investment.


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