Close

Choose your country

Or view all businesses for sale

Worldwide

Sell Your Business

Buying a business: best practice

Interview with...

Rupert Cattell, Managing Director of Turner Butler and Amberglobe
Topics covered:
Advantages of buying over starting up, finding the right sector, the importance of partnerships
CV:
First became a director 15 years ago at the age of 41. His most recent non-secretarial directorship is with Turner Butler Limited.
Expertise:
Amberglobe specialise in the selling of care homes, day nurseries and retail businesses. Turner Butler specialise in selling all businesses on business parks and industrial estates.  
Location:
London

 


Buying vs starting up

"I think the main advantage [of buying] is the fact that you've got some kind of security of cash flow, and you've also got a proven business model. 

"[With a] start up, you believe that your business is going to be successful and for a period of time, you're probably going to have negative cash flow and to some extent, it's a leap of faith. 

"Whereas if you're actually buying a business, you've got a proven earnings record, you've got a proven history of customers, you've got a proven product, and you've got a business name. So you tend to accelerate the time in which you're likely to reach break-even or enter profitability, and therefore get your money back."

Finding the right sector

"If you have no idea what sector to you want to go into, then I think you need to go to site like businessesforsale.com and start to look at all the various businesses, and stuff will come out at you that makes you think "I don't want to do that" or "I do want to do that". By a process of elimination, you're starting to refine your search. 

"There are obviously businesses where you're going to need some degree of knowledge, so if you're going to go into something like precision engineering with no background and no understanding of engineering, you could struggle."

If you're actually buying a business... you tend to accelerate the time in which you're likely to reach break-even or enter profitability.

The right partnership

"Like marriage, you want to make sure you're picking the right partner, so you want to spend as much time thinking about the person you're going to go into business with as you would about buying the business because it's quite difficult to row back from that sort of decision. 

"So, yes, it certainly is useful to bring in talent and experience, but I would also say that if you are going to go into a new venture with a new partner, you definitely want to have sorted out a relationship with a shareholder's agreement or partnership document."

Common buyer mistakes

"They never have enough money.

"So, they are starting from behind the 8-ball from the beginning. They don't take into account the deal costs and they don't necessarily take into account the working capital demands of the business.  

"So, I would say when you do your financial projections you want to look at it on the basis of underperforming by about 25%. If you haven't got the money to be able to sustain yourself during that sort of downturn, then you're probably underfunded."

Proof of a Creditable Buyer

"I would say you need at least 25% - possibly more, possibly 30-35% - of the purchase price in cash or cash equivalent, that's a major leap forward in terms of getting creditability. 

"Again, you need to have talked around and understood exactly what you're buying because a vendor will be nervous about you coming in, because you're potentially going to blow their cover and upset their staff and business, so they want to be convinced that you're a credible buyer who understands the sector and understands what they're getting into."   


Subscribe to our email updates

Sign up to receive the latest advice, most popular businesses, special offers and much more.

I'm interested in


BusinessesForSale.com is committed to protecting your privacy. We will use the information you provide on this form to send you marketing emails . Find out more about what we do with your information in our Privacy Policy.
Marketing Emails: You will receive newsletters, advice and offers about buying and selling businesses and franchises. We will also send you information about events relating to buying, selling or running a business.

Are you a Business Owner?

Set up your Private Seller Account and create your listing today

Get Started Here

Are you a Business Broker?

Set up your BrokerWeb Account and list multiple businesses

Get Started Here