So you are thinking about buying a business but have you thought about why?. The reasons can be many and varied, your current employment doesn't provide a stable income and you are buying a job, you are looking for a lifestyle change, looking for a sideline income or you are genuinely interested in that industry.

Generally speaking, owning a business is very time consuming so it would be helpful if you buy a business that you have an interest in, be it food, fitness or sport. Tapping into an interest of your own also helps as you have knowledge of the industry and related products. A lot of successful business operators started out by building a business around their interests.

There is also the question "should I buy a business or start a business?"
There are pros and cons around buying a business and some of these for consideration are as follows:

Pros – Premises already set up; existing customers and contracts; easier finance as Bank's prefer to see historical trade; existing plant and equipment; utilising existing owners experience

Cons – Business may be too expensive; may have a poor reputation; old equipment which may need replacing; customer and staff loyalty, will they remain; is there really a  business once the current owner leaves?

Buying a business can be very expensive so it is important to conduct checks and balances to ensure that what you are buying is worth it and the business is sustainable. Do some research into the industry and demographics of your area.

Is the business in an industry which can expand and grow as technology changes?; does it have a limited customer base in your area?; are there a lot of competitors in your area?; how big an area can you service?

If it's possible, speak to staff, clients, competitors and get a feel for the business and its reputation; perhaps work in the business for a couple of months to gauge how the business operates and if the financials appear realistic; is it a seasonal business and are you seeing it in a peak period?.

Get a second opinion, take the figures provided into your accountant and ask their opinion on the value of the business. Obtain a break down on the value of plant, equipment and stock this way you know how much goodwill is in the purchase price of the business.

Should the premises that the business operates from be rented, speak to the owner to understand how long the lease has to run, whether you can negotiate a new longer lease agreement and if the owner will renew the lease on expiry. Generally for commercial tenancies, owners want 3 months in advance for a rental bond. Considering this when organising funding for purchase or it may leave your working capital short, which can be disastrous when taking over a business.

There can be many pitfalls to buying a business so don't rush in a buy the first one you see. Make decisions from your  head and not your heart. However if you make the right, considered decision,  the upside of running your own business is unlimited.