Buying a business

Buying a business

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Hello

One of my clients has asked for my opinion and advice on the value of a business she is considering buying.

Can anyone recommend any books / checklists to help me advise on the above situation

Also, do I need to add any disclaimers to any advice given ?

Any words of wisdom from the Aweb community would be greatly appreciated.

M JACKSON

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By AnonymousUser
30th Mar 2007 16:06

Alarming

I would not like to hazard a guess at the value of a small business, especially an unincorporated business. I would examine the accounts for "funnies" and make comments on these without in any way giving an opinion as to the value. The last time I did such an exercise it quickly became clear that the business was far more profitable than the accounts suggested because the existing proprietor lived 20 miles away and motor expenses were huge (whereas the purchaser lived a few hundred yards away and didn’t have a car). The vendor was of foreign extraction and seemed to use the shop telephone to keep in touch with his folks in the old country; ie the accounts contained an unbelievably large debit for telephone costs. One assumes that there were massive adjustments in the tax computation for these two items (one hopes so anyway).

There are many other personal factors to consider eg how can you know how much proprietor's time is devoted to the business? This would have a major bearing on the purchaser's decision and would be relevant to the "value".

We would consider the likely pay-back period in the light of whether there are going to be loan repayments by the new owner, the staffing requirements, training costs, any possible loss of customers due to the change etc.

I would expect the client to have some understanding of the trade he/she was going into ie to have his/her own opinions on staffing, training etc and the effect on the customer base of a change in ownership.

I would put my observations in writing and state that I was not giving an opinion as to the reasonableness of the purchase price.

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By User deleted
30th Mar 2007 17:26

What are the terms of your engagement ?
You must have a separate contract from your client setting out your responsibilties and any limitations on your liabilty-which must be discussed with and agreed by your client.

.Is your client using a lawyer-if not be very very careful-you will pick up responsibilty for anything that goes wrong unless your contract is watertight.
.If you have no expereience in this field, perhaps you should not take on what looks like an open ended obligation.

A few specific points:-

Are there employees?

Has PAYE been operated properly?
Is your client taking over any TUPE responsibilities.

Is the business registered for VAT? Should it be?
Is your client?.
Is there a TGOC issue.?

Does the business depend on personal connections - is there a properly drawn up non competition, non poaching contract?

Have you seen a business plan , mangement figures etc etc?

. Has you client any knowledge or experience of the business
proposed to be purchased. ?

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