Once you’ve found a business that floats your boat, you’ll undoubtedly embark on a lengthy process of due diligence to make sure that it’s a sound investment.
Although a careful examination of the business’s accounts, trading history and pipeline will provide you with the information you need to determine if the asking price is fair and if there’s potential for growth, there’s no substitute for a thorough visual inspection of the operation as a whole. This is an especially important stage if your prospect is a retail or hospitality business tied to a specific location and if you’re looking to jump in and start trading right away.
Even if you think you know the location of the business quite well, it’s worth spending time visiting your prospective premises a number of times to see how it performs as a location. Visit by day and by night and see how it feels to you. Is it bright and well-lit? Does it feel safe? What’s the surrounding neighbourhood like? Find out as much as you can about the area by looking at the crime statistics, ask around and make your own observations of the surrounding area to help you build up a picture of the business and its environs.
Check out your chosen business on different days and at different times. If you think a good percentage of your trade is likely to come from passing traffic, see how much of this there actually is – park up and count how many people enter in the space of an hour, and repeat this exercise as often as you are able. You’re looking to see if footfall is consistent and what type of customers the business is attracting. Make a note of how people arrive at the business – on foot or by car? Is there enough parking? This data could give you a valuable insight into day-to-day business.
Be your own mystery shopper and make a few purchases using different payment methods. This is one of the best ways of evaluating your potential business. You’re looking to see how well-run the business is, if staff are helpful and if you can see areas that would benefit from improvement. The more information you can gather about the state of the business and the quality of its products and services, the better placed you’ll be when it comes to negotiations.
Don’t overlook the opportunity to check out the competition. Visit the area and find out as much as you can about businesses with a similar proposition. See how their footfall compares and what kind of customers they’re attracting. Are they providing products or services that aren’t part of your prospective business’s portfolio? How could you differentiate your offering? Having competitors isn’t necessarily a bad thing – pubs and cafes often thrive when there are several to choose from in an area – but you do need to be clear about your proposition in the context of local competition.