This is a quote from Ray Thomas who started his own business by buying an existing one. He chose to buy a franchise resale for reasons you are about to learn. These are his first wise words of advice and ones that are valuable to anyone thinking of buying a business as a way to start their own business, whether in the UK, North America or anywhere in the world.
“When buying a business, check and recheck your ‘due diligence’ there’s always something that you miss, something that’s not obviously apparent when you first start negotiations – don’t rush -take your time to understand the business you’re buying into”
Ray was very careful in his choice of business. He took the buying process step by step over a number of months. He would like to share this experience, captured in these key points with you.
• Choose a business that relates to your commercial experience and your own business skills
• Buying a franchise resale has a number of benefits. Two of these are the training and support you’ll receive from the franchisor; another is acquiring a going concern with an existing customer base
• Get the latest trading figures to see how the business is performing and whether any circumstances have changed since the business was valued for sale.
• Check the customer base to check the number of active and dormant accounts
• Examine the customer profile to see how the business is spread between accounts – if the business is reliant on one or two accounts, the loss of these accounts could dramatically damage your future income.
• If possible, agree a hand-over period in which the previous owner introduces you to the client base and explains the ‘back-office’ systems and day-to-day running of the business.
• Make a generous provision for working capital to cover running costs – and keep an extra financial contingency for the unexpected.
To understand Ray’s story here’s some interesting background. Ray trained as a mechanical engineer. This gave him a career long ability to discipline his thinking and develop his analytical and organisational abilities. His outgoing personality and communication skills came into play as he moved into sales. Over time, he became a regional manager with a multinational company, firstly looking after the South West then extended his territory responsibility across to Wales and up as far as Birmingham.
As demands increased without a commensurate increase in his salary package, Ray started to explore opportunities where he and his family would receive a greater return for his efforts by becoming his own boss. He investigated a number of different business avenues and narrowed the options down to franchising. The question was whether to start from scratch with a ‘virgin’ franchise territory or to buy an existing operation. The other question was which franchise to select
As Ray had experience of the motor trade, at one time being the sales manager of a chain of car dealerships, he examined a franchise involved with supplying garage workshops with tools and another specialising in bodywork repairs. He also explored franchises that were related to his more recent experience in the Health & Safety and Personal Protection Equipment (PPE) sector. Finally he chose a business-to-business (B2B) franchise that specialises in the supply and servicing of cleaning and hygiene products.