buying a business, page-3

Hi pbro. I'm a chartered accountant, with experience in the corporate and insolvency fields. Plenty of experience in dissembling accounts to determine if they are realistic. A couple of years ago I helped some friends who were looking to do exactly what you are wanting to, for the same reason, and I looked at the accounts of some businesses for them. Without exception, the numbers were dressed up, with switches between cash accounting one year, and accrual accounting the next, distortions with the amounts the owners had taken out as salaries (easy to have an anomalous profit, if you take out heaps in 2010 and 2011, and slack off in 2012), weird stock movements - the crap was endless.

But all the businesses were one man, or one couple, businesses, in the sense that all the goodwill lay with them (even if they employed staff). They were the sales force, the despatch clerks - all customer and most supplier contact was through them. If you buy the business, you must be sure that you can maintain the level of contact. Talking to the customers before making an offer is a good idea, especially if they have a small customer base.

The big advantage of starting from scratch is that you know there is no baggage from previous owners. No poor reputation, undisclosed debts, unhappy ex-employees, equipment just about to break down, dodgy accounts - and you won't need a lawyer to draw up a contract to try to protect you from all those things.

Good luck with whatever you decide to do!