how to check a business worth

myright

I've seen a small business I may want to buy. The owner has offered it to me for 50k. Although he said its valued at 55k. As he's looking for a quick sale. It's a takeaway.

The rent rate for premises is 130 per week . Remaining lease is 10 years

How can I check what the actual business is worth. Could I check this??
Other than profits and turnover. What else should I be checking for?

PlutoinCapricorn

Is it a limited company? Ask to see the accounts.

zygurat789

PlutoinCapricorn wrote: »

Is it a limited company? Ask to see the accounts.

Sole traders also produce accounts which are the key to the value of a business.
If you are thinking of investing £50K then you ought to take advice, go and see an accountant, he will want to see copies of the last three years accounts.

myright

It's a takeaway.

How much should an accountant charge to value it?

Also how do I go about getting a business loan? Grant . It's my first ever business . Venture.

zygurat789

myright wrote: »

It's a takeaway.

How much should an accountant charge to value it?

Also how do I go about getting a business loan? Grant . It's my first ever business . Venture.

Then, so long as the cost is reasonable it will be worth it. You will almost certainly need an accountant on an ongoing basis to prepare accounts and submit tax returns. An accountant is also the professional who will help you most with obtaining a loan.

First you have to be able to obtain finance, a potential lender will want to see a commitment from you, how much can you put into this business?

Mistral001

An accountant would be pretty much essential here I would have thought as others have said, but as well as that you need get some sort of feel for the value yourself by doing your own research. Just like buying anything I suppose like a house or a second hand car. I believe there are publications which advertise businesses, there might even be some chip shop trade magazines which have classifieds in them.

Pennywise

You need both an accountant and a solicitor to do "due diligence" which is basically checking things over to make sure you're not being ripped off. Paying for this is just another cost of business.

Your solicitor should check things like the lease, it's length, break clauses, your property repair/maintenance obligations, rent increases etc. Remember you have virtually no protection unlike a house rental, so what you sign in the lease transfer stands and you can't wriggle out of your responsibilities etc.

Your accountant should check the last 3 years of accounts, check they make sense, check the last 3 years of VAT returns to make sure that they agree with the accounts, highlight any anomalies, etc. Your accountant could also prepared some forecasts for you to make sure that your personal drawings needs, taxes and loan repayments are all affordable and covered by the business cash flow.

As for loans, you're not going to get much unless you have security to offer, i.e. plenty of equity in your house, especially if the business is a leasehold, as the bank won't have any security on the business itself. Even with equity in your house, you'll usually only be able to borrow 60-75% of the asking price, so you're going to need £10k-£20k at least of your own money to put in to pay the balance and to cover working capital needs etc.

pooch

myright wrote: »

I've seen a small business I may want to buy. The owner has offered it to me for 50k. Although he said its valued at 55k. As he's looking for a quick sale. It's a takeaway.

The rent rate for premises is 130 per week . Remaining lease is 10 years

How can I check what the actual business is worth. Could I check this??
Other than profits and turnover. What else should I be checking for?

Like anything else, it's only worth what someone is willing to pay for it.

pooch

myright wrote: »

It's a takeaway.

How much should an accountant charge to value it?

Like anything in business, the accountant will charge what he thinks someone will pay

Why not get some quotes?

myright wrote: »

Also how do I go about getting a business loan? Grant . It's my first ever business . Venture.

Have you asked at your bank?

PlutoinCapricorn

A company has an independent existence, something that can be bought and sold; with a sole tradership the trader is the business, so things are more complicated.

zygurat789

PlutoinCapricorn wrote: »

A company has an independent existence, something that can be bought and sold; with a sole tradership the trader is the business, so things are more complicated.

I think:-
A company has an independent existence, something that can be bought and sold; with a sole tradership the trader is the business, so things are [STRIKE]more[/STRIKE]less complicated.

So there you are.