When a business appears on the market at what looks like a fantastic price, it can be tempting to buy first and ask questions later.
However, committing to a purchase without the expert help available from an independent valuer may expose you to a number of hidden risks and costs.
A qualified professional will not only have access to the vital data needed to assess a business, they will know which statistics to look at and how to interpret them correctly. You may wish to consult a legal specialist, a financial specialist, a business specialist or all three.
An internet search will turn up dozens of independent professionals offering their services. It can be difficult to choose one based on the information they present.
Word of mouth, through recommendation by friends or business contacts, is the best way to go, but if this isn't possible, scan the internet for the opinions of others. Find out when the business was set up, and where its founders worked previously.
What relevant qualifications or experience do they have? Do they have a background in your sector?
A basic report might be a simple valuation of the business and its assets, while a comprehensive report will also make use of external factors and a study of the wider market when calculating value
It is possible to request a report at any of several levels of detail, depending on your requirements. The more money involved, the more detailed the report you will probably want.
A basic report might be a simple valuation of the business and its assets, while a comprehensive report will also make use of external factors and a study of the wider market when calculating value. The valuer should use their specialist knowledge to provide a personal opinion of the business's worth, as well as facts and figures on paper.
It is important to be aware of any ongoing debts or lawsuits for which you may become liable if you take the business on. A professional audit will bring anything of this nature to light.
It will also examine the business's past history. If the business has been geared towards short-term profits over recent months in order to make it appear a more attractive purchase, the changes in activity will be obvious.
A thorough investigation into the current state of a business can save a great deal of trouble later. Speaking to staff and clients can give a very different picture of affairs to looking at facts and figures on paper.
Expert evaluation will take into account not only the current value of a business, but its potential for growth and profit in the future. A business which is currently struggling but has a strong chance of improving its revenue a year or two down the line could be a bargain indeed.
A professional will help you evaluate the worth of intangibles such as the skill and knowledge of the business's employees and its list of regular clients, as well as assets from specialist equipment down to computers, desks and chairs.
Once in possession of all the facts, your position will be much stronger when it comes to negotiating with the seller. You will have a good idea of what the business is worth, both on the market and to you, and you will have decided on a maximum price you won't go beyond.
Having a professional evaluation to back you up can make all the difference in negotiating a price.