Points to note when buying a business

Press, 23 February 1978, Page 12

Points to note when buying a business

We have recently been asked how people should go about raising sufficient finance to start a business. We assumed that the inquiry came from a person with little or no experience in setting up a business but who was prepared to learn, and to go about his task energetically. People such as this generally do well in dairies, j grocery businesses and takeaways. It goes without saying I that if the price of the I business is reasonable and it is conducted sensibly, it can be financially rewarding. But as well as the ability to raise sufficient cash to get it under way there are several other factors which should be taken into account. Note should be taken as to whether a business under consideration is in a good position, whether the area is on the decline or has a soundly based potential for improvement, and whether there is likely to be strong opposition from large chains who can put the small businessman out of work almost overnight. A district changing to , industrial need not be a I drawback for dairies and ' food bars. j The type of customer

might change but a situation where a large number of people are employed could be an advantage, especially in lunchtime trade. It could alter a seven-* day, predominantly residential business, into a five-day one without the slightest loss of profit.

In the case of businesses such as dairies and

food bars the intending buyer should ascertain if there are any outstanding Health Department or local body requirements and that a current licence to run the business is available. Some real estate agents specialise in the sale of businesses. They will have first-hand knowledge of values and the raising of finance. When a contract to buy a business is entered into the price will usually include stock at valuation. The actual figure will be determined when an appraisal is made by a qualified person acceptable to

both the vendor and the buyer — who will share his cost. You may prefer the situation where each person is represented separately, the two coming together to find a medium of agreement. Both the vendor and the buyer should make certain that a schedule of plant and fittings is attached to the agreement. These should be checked when the new owner takes possession. The new owners should arrange for careful records of income and expenditure to be made. Unless he has sufficient experience in accountancy to do so himself he should engage a chartered accountant to look after the business records. Properly kept accounts show how the business is progressing and will prove a valuable help when the time conies to sell.

Engagement

Jensen — Babbage: Mr and Mrs E. W. Babbage, 214 Waiiti Road, Timaru, have much pleasure in announcing the engagement of their eldest daughter. Karen .Anne, to Christopher William, youngest son of Mrs E. M. Jensen, 123 Clinkard Avenue, Rotorua, and the late Mr L. C. Jensen.