Buying a business

absolute0

An opportunity has come about whereby a day nursery is looking to sell. We are interested in buying as have experience in running a nursery, but have no experience in the buying process.

We've set up a meeting with the owner to go through their accounts.

Can anyone recommend any advice please?

Thanks

Jeremy535897

It depends on what is involved. How much are you likely to be paying? Are the premises owned or leased?

You need to look at the quality of the business. Are the prices they are charging prices you could make money on? What is their customer retention like? What is the child to staff ratio? I am sure you will be able to list a whole lot more things to ask, if you just think about how you have run a nursery. Are you up to date with the current government provision? Is the council a significant factor?

The accounts will tell you whether their expenses are in line with what you would expect, like utilities.

Most importantly, if you have an accountant, get them involved at the start. If you don't, consider engaging one.

Savvy_Sue

You'll also need a solicitor. Do you understand the TUPE process?

MobileSaver

Jeremy535897 said:

Most importantly, if you have an accountant, get them involved at the start. If you don't, consider engaging one.

Savvy_Sue said:

You'll also need a solicitor. Do you understand the TUPE process?

+1

I cannot reiterate enough how important it could turn out to be to hire professionals from the get go; just consider the fees as an essential part of the overall purchase price.

A good accountant will give you confidence on their business accounts and highlight any discrepancies as well as advising on cash-flow issues and the most tax efficient way to proceed.

A good solicitor will ensure you are actually buying what you think you are buying and highlight any risks you might be exposed to; they can also be indispensable if things go wrong post-purchase.

Admittedly I was on the other side (i.e. selling a business) but I was resistant and balked at the thousands I eventually spent on professional fees during the sale transaction. However, six months post-sale when things didn't initially go quite to plan, the solicitor was able to make me literally millions more than I would otherwise have made and the accountant made sure I only paid 10% tax on those gains - without a shadow of a doubt, for all my protestations at the time, those professional fees were the best money I have ever spent in my entire life.

absolute0

Thanks everyone for your replies. TUPE is known to us, and good to be reminded.

Definitely going to need an accountant, the meeting with the owner went well, but they didn't want to disclose their accounts, unless it's via an accountant.

Does anyone have any idea as to how much an accountant would charge for the privilege?

Jeremy535897

absolute0 said:

Thanks everyone for your replies. TUPE is known to us, and good to be reminded.

Definitely going to need an accountant, the meeting with the owner went well, but they didn't want to disclose their accounts, unless it's via an accountant.

Does anyone have any idea as to how much an accountant would charge for the privilege?

It depends on the size and complexity of the deal, and what you want the accountant to do. I would have thought you mighht have some experience of accountants in the past?

The Institute of Chartered Accountants is a good place to look, and an initial free meeting can be had:
https://www.icaew.com/about-icaew/find-a-chartered-accountant/icaew-business-advice-service

Sandtree

absolute0 said:

Does anyone have any idea as to how much an accountant would charge for the privilege?

What do you want them to do?

Simply receive the accounts and pass them to you blind?
Review the accounts and pass basic comment on them? Really dig into them to validate them?
Consider the valuation of the company?
Consider the different mechanisms of purchase and advise?

An accountancy will normally charge up to a couple of hundred per hour for advisory service, could be more if they are more specialist like forensic accountancy.

If you are actually buying the company itself then there is no TUPE as the employees are still employees of the same company but you are taking on all the past and current liabilities hence why many purchases dont actually buy the company itself. Based on your other comments however this may not be your first rodeo so wont teach you to suck eggs... a mistake a household name accountancy made when presenting their 8 digit quote for supporting a sale I was working on

Mistral001

Is the reason they gave you for selling needs to be a 100% credible one?   If you have any doubt about it, dig very very deep.