5 tips for buying a business


Everybody loves a shortcut: an alternative route could, however, be littered with other, unseen hurdles.

The very same applies when buying a business rather than starting something from scratch. Lucien Pierce of Phukubje Pierce Masithela Attorneys shares some prudent advice on how to avoid unnecessary pitfalls when taking this particular shortcut.

You may be bowled over by the sales and other figures, but be sure to check them thoroughly to make sure they are accurate. Your best bet is to to get confirmation from a third party, such as the business’s auditor.

Make sure that you sign a sale of business agreement. This should clearly outline the exact date that you take control of the business and what you will receive. If possible, get your lawyer or a legally trained friend to look over the sale of business agreement.

Be sure to get warranties (promises) from the seller that no major changes to the business have taken place between the time that you started negotiating and the signing of the agreement. For example, you should be assured that the sales figures will remain reasonably constant and the stock will be maintained at reasonable levels. Also, be sure to get in writing what equipment, stock and personnel you will take ownership of.

An often-overlooked warranty from the seller that could scupper your best efforts is that the business is not part of any legal action. If there is, be sure to specify that the seller will be responsible for sorting it out - ideally before you take ownership.

On the date that you take over, recheck the sales and other business figures to assure yourself they have not changed substantially. Get the seller to hand over and sign the latest sales and business figures such as the management accounts, and personally check the stock and inventory.

Key take-away: Buying an existing business is a great way to get a kickstart in the world of commerce. Your investment is only as secure as the legal paperwork that assures you get what you’re paying for.


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