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Buying a business

Posted: May 29th, 2018, 10:13 am
by Indig0
Moderator Message:
Moved to "Running a Business" .


* Apologies in advance if this is not the right sub-forum for this - please feel free to move if required *

Has anyone gone down the path of buying an existing business as a means to generating additional income? What was the experience like?

I've been considering this as an option that could initially start out as a side-hustle, but over time, potentially develop into something more, and that could also be continued after I had finished with my 'primary' career. The main benefit is obviously that I would be purchasing something that was already proven, and (ideally) cash flow positive on day one.

I have a fair amount of spare time at present as well as a partner who is keen to come on board with a shared project, so while I would not be looking for something that would be full time initially, there is certainly the willingness and ability to put a decent chunk of time / effort / resources behind this as required. I am very conscious that a number of businesses that get sold end up drifting or moth-balled by the new owners due to lack of one of the aforementioned areas so I would be aware of this risk going into any purchase.

In terms of actually finding the right opportunity, is it just a case of sifting through the online ads and coming up with a shortlist that you can then start undertaking more detailed due diligence on? I suppose a number of good sales take place through word of mouth but that would be more by chance than design at this stage.

Are there any 'typical' companies that are good to buy as a going concern or sectors to look in to? It is advisable to only consider companies that directly relate to our current careers, or are there any suitable areas where previous experience is not necessarily a pre-requisite to actually owning the company?

Re: Buying a business

Posted: May 29th, 2018, 1:42 pm
by didds
I've not ever done this, and not even considered it so the following should be taken in that vein :-)

I think it wold have to depend on how much effort the current/historical owners have given it. If they run a 6 x 12 hour business (eg community shop as per the above) then it probably won;t work to buy it then run it as a 5 x 4 hour business - or whatever. I confess with that in mind I am struggling to think of a business that could be run as a quasi-profitable hobby almost unless it was things like mobile evening hair-dressing or some similar service industry... and those sort of things you could just as well start up as self employed as see where that takes one.

I'll get me coat!!!

cheers

didds

Re: Buying a business

Posted: May 29th, 2018, 3:54 pm
by Indig0
Many thanks, both: good info. and food for thought.

Yes, didds, part of the selection process would be to find those opportunities that align with our forecast availability. I'm continuing to research the options but at present I have thought of:

- cleaning companies
- outsourcing businesses
- online businesses

As this would very much be our first foray into this area, it may be that we start small, and prove the model, before putting more time and money into a bigger acquisition down the line.

I do agree, however, that most serious ventures (i.e. consistently profitable) do need to be run as full time obligations, therefore the options available to us may be much more limited.

Re: Buying a business

Posted: May 30th, 2018, 9:22 am
by gryffron
My latest business idea is to run a team of properly managed plumbers or electricians. You could use cellphones to track them between jobs in order to provide customers with an accurate and continuously updated ETA at their next job. Rather like many of the parcels companies now do.

Most of the self-employed ones are USELESS at managing their time, informing customers about delays or emergencies etc. I reckon you'd be everyone's first choice service provider if you had a decently managed system that kept customers informed properly.

Gryff

Re: Buying a business

Posted: May 30th, 2018, 10:30 am
by Itsallaguess
gryffron wrote:
My latest business idea is to run a team of properly managed plumbers or electricians. You could use cellphones to track them between jobs in order to provide customers with an accurate and continuously updated ETA at their next job. Rather like many of the parcels companies now do.

Most of the self-employed ones are USELESS at managing their time, informing customers about delays or emergencies etc. I reckon you'd be everyone's first choice service provider if you had a decently managed system that kept customers informed properly.


Now all you need to do is to find some plumbers and electricians who are keen to let you know exactly where they are at all times of the day....

I wish you the best of luck with your new venture....

:D

Cheers,

Itsallaguess

Re: Buying a business

Posted: May 30th, 2018, 1:20 pm
by didds
I can see the idea wbhind thye central plumber, sparky thing.

the "issue" potentially is either that

* the end price will be higher as there is your logistics/communications level to include, OR
* the sparkies and plumbers would take a cut in effect to keep the prices in line with other similar services not using the central comms/office
* the client is happy to pay a premium to be kept in constant loop etc.

And of course there is always the consideration already hinted at that if the tradesman won't be communicating with their client base when appropriate, why would they communicate with "base" ?

However, I apologise for being so negative :-) I can see that IF the above can be overcome and the concept provesworkable then opwrd of mouth and reputation may well overcome many of these points.


didds

Re: Buying a business

Posted: May 31st, 2018, 12:15 am
by AndyPandy
Indig0 wrote:
Has anyone gone down the path of buying an existing business as a means to generating additional income? What was the experience like?


Yes, bought another training Company exactly a year ago. Owner built it up, paid for a website redesign that made it a natural page 1 on Google, then got overwhelmed by its success and wanted out. By the time I approached him, he'd dealt with tens of enquiries but no money on the table and had dropped his price already. Very little negotiating and shook hands within 2 hours *. Both sides happy and deal completed a month later. I don't know if my experience is typical at this (smaller) end of the market. This is my only actual purchase although I sniffed at some in the past. The due diligence was minimal as I could see on Google how good it was and I reviewed his client history when meeting him, so knew it was genuine. Advantage of my Business (First Aid training) is that it has to be repeated every 3 years so expected (and has proven to be the case) a high percentage of repeat business. I got my Accountant to review the Contract (a standard one drawn up by his solicitor) and made sure I bought the Assets, not the Business, just for protection. Very happy a year on.
Indig0 wrote:I've been considering this as an option that could initially start out as a side-hustle, but over time, potentially develop into something more, and that could also be continued after I had finished with my 'primary' career. The main benefit is obviously that I would be purchasing something that was already proven, and (ideally) cash flow positive on day one.

I have a fair amount of spare time at present as well as a partner who is keen to come on board with a shared project, so while I would not be looking for something that would be full time initially, there is certainly the willingness and ability to put a decent chunk of time / effort / resources behind this as required. I am very conscious that a number of businesses that get sold end up drifting or moth-balled by the new owners due to lack of one of the aforementioned areas so I would be aware of this risk going into any purchase.


I'd suggest that if you bought an existing business, it will take up considerably more time than a 'side-hustle' that you are building up would. If you don't expend the time, you'll lose the existing customers (if the business is one that has repeats)

Indig0 wrote:In terms of actually finding the right opportunity, is it just a case of sifting through the online ads and coming up with a shortlist that you can then start undertaking more detailed due diligence on? I suppose a number of good sales take place through word of mouth but that would be more by chance than design at this stage.

Again, IMO, yes. You could perhaps put feelers out that you are looking to buy a business, but friends & colleagues' first question will be 'what sort' so you need an answer prepared.

Check out https://uk.businessesforsale.com/uk/ to get some ideas. That's where I found mine via Google. You can register an interest in something, though and as long as you present a reasonable case and sign an NDA, they will send you the full particulars.

Might be worth a trip to the Franchise show. Franchises cost up front and are definitely not a sideline, but might spark some ideas.

Indig0 wrote:Are there any 'typical' companies that are good to buy as a going concern or sectors to look in to? It is advisable to only consider companies that directly relate to our current careers, or are there any suitable areas where previous experience is not necessarily a pre-requisite to actually owning the company?

People take quite radical leaps into new businesses, but I can't see how you can make something work that you don't have an interest in / *some* skills. I'd never set up a website selling Football memorabilia for instance, even if I inherited a bundle from some deceased relative.

Drop shipping is popular "Copy this idea" and "the 4 hour work week" are books, both predicated on this method and worth a read. Tricky part is finding a product that isn't massively supplied already or could be replicated by Amazon.

Have a nosey around Alibaba. I've been buying keyfobs with a resuscitation faceshield in a pouch from a UK bod that's been importing them for his and anyone else's benefit (I give them away on courses - they have our website address on). Just found out that although they are very cheap, he's charging me about a 100% mark-up. Just placed my first order directly. The amount of stuff on Alibaba means you could find something unique to import and sell on via ebay / Amazon / Facebook Marketplace.

If you have a craft / hobby and were wondering about making a living from it, don't. A friend has just closed her shop reselling crafty stuff from a range of artists. Busy shop, but not profitable for the number of hours needed. Selling directly at Craft Markets can be feast or famine and generally not good at earning a decent income, especially when you consider the hours travelling setting up & striking and pitch fees.

Our Business model works, if you can find a suitable product. Find clients needing training, pitch the course to (pre-approved) trainers. Pick lowest bid. invoice client, pay trainer, pocket difference. I can run it any time/anywhere I have my laptop and t'Interweb (Voda WiFi dongle works a treat). Dog walking? Loads around here, obviously popular. Find people with dogs. Find people willing to walk dogs for minimum wage (again, I have a friend that does this), pocket the difference. Dog walker on minimum wage walking 5 dogs at £10 an hour for you. Do the maths.

Don't rush into it, test the Market as you say, then build up. This was not the first business I looked at but it was the first where I thought it was a fair price. Do look at Businesses, but don't rush to buy the first one that comes along.

* He was offered about twice as much soon after but honoured our handshake, as did I when I said I'd buy it. I once bought a car off a guy called James Grafton. His father was Jimmy Grafton, Agent to the stars including Harry Secombe. They never had a Contract, just thrashed out the Terms on a Golf course and sealed it with a handshake. James trusted me to test drive the car on my own and once we'd agreed a price he took it off the market and I brought the money when I said I would. Be nice if all Business could be done that way....

Re: Buying a business

Posted: May 31st, 2018, 8:31 am
by redsturgeon
AndyPandy wrote:Our Business model works, if you can find a suitable product. Find clients needing training, pitch the course to (pre-approved) trainers. Pick lowest bid. invoice client, pay trainer, pocket difference.



We do something similar in some parts of our business but how do you stop your trainer forming a relationship with your client so that next time they cut out the middleman and go straight to the trainer. This has happened to us on several occasions.

John

Re: Buying a business

Posted: May 31st, 2018, 9:27 am
by Indig0
Very helpful, AndyPandy! Really appreciate you taking the time to reply. Sounds like you made a very astute move and it is working out.

I'm also interested to hear your thoughts on John's question - I've often wondered about this and if there was anything businesses could do to manage the situation, or whether it was just one of those things that you chalk up as a cost of doing business.

Re: Buying a business

Posted: June 1st, 2018, 10:58 am
by AndyPandy
redsturgeon wrote:
AndyPandy wrote:Our Business model works, if you can find a suitable product. Find clients needing training, pitch the course to (pre-approved) trainers. Pick lowest bid. invoice client, pay trainer, pocket difference.



We do something similar in some parts of our business but how do you stop your trainer forming a relationship with your client so that next time they cut out the middleman and go straight to the trainer. This has happened to us on several occasions.

John


Part of the Approvals Process is the Trainer signing a Contract, terms of which include "no branding on the course" and "no poaching". As part of monitoring, they are all subject to Quality Assessments, so we can pick up any branding issue during a visit.

First Aid Training is a Buyers' Market with Trainers falling over themselves for work. There are some good groups on Facebook. Backstabbing Trainers (and suppliers come to that) get outed pretty quickly *, so would find themselves dropped by several of their Contracting Companies if caught. I've also used an 'outing' to avoid recruiting one person after warnings there.

No, we can't stop it happening, but if it is going on, the impact on us is not material. Of course, with yourselves it will depend where the power lies - with you or your Freelancers.

* If necessary, there are ways of outing that can avoid naming names (and potential litigation), but everyone knows who they are talking about....