Buying an existing garage, eyes open.

Work out what is actually being sold

The first question is whether you are buying a business or a set of assets, and the answer changes almost everything that follows.

A business purchase brings customers, staff, contracts and liabilities. An asset purchase brings equipment and possibly a lease, and leaves the rest behind. Sellers frequently describe one and mean the other, and the price only makes sense once it is clear which is on the table.

That distinction also decides what diligence matters. Buying assets, you mostly need to verify condition and title. Buying a business, you need to understand where the revenue comes from and what obligations arrive with it.

The revenue needs a shape, not just a total

A turnover figure tells you very little about whether it will still be there next year.

• How much comes from returning customers versus one-off work.
• Whether any single account is a large share, and whether that account is contracted or a handshake.
• How much depends on the departing owner personally, which is the most common thing to evaporate.
• The split between the work you want to do and work you would decline.
• Whether the recent trend is stable, and what explains any recent improvement.

That last one deserves scepticism. A business being sold often has a flattering final year, and it is worth understanding whether that came from something durable or from deferred maintenance and a marketing push.

Premises and lease before anything else

A workshop is only worth what it earns from where it stands, and the lease can quietly make the whole thing unviable.

Check the remaining term, the review mechanism, whether it can be assigned to you at all, any dilapidations liability, and what the planning position is for the use you intend. A short lease with no security is a very different purchase from a long one, whatever the accounts look like.

Where the property is owned and included, the same care applies to condition, since a roof or a drainage problem on an industrial unit is not a small number.

Talk to the people, carefully

The team is usually the largest part of what you are buying and the part most likely to leave.

In many jurisdictions employees transfer with the business along with their terms and service, which is protective for them and a liability to understand for you. Find out who is key, what they are paid, whether anything has been promised informally, and whether they know a sale is happening.

That last point is delicate and it is worth agreeing with the seller how and when it is handled. A team that learns from a rumour is a team that starts looking, and losing the senior technician in the first month can undo the reason you bought.

Look for the deferred costs

Every business being sold has some, and they are usually visible to someone willing to look properly.

Equipment nearing end of life, calibration overdue, a building needing work, software on an old contract, waste and compliance paperwork not kept, and maintenance quietly postponed for a year to improve the accounts. None of those are reasons not to buy; all of them are reasons to adjust the price or the timetable.

The practical method is to price them as a list rather than argue them as an impression. A schedule of what needs doing in the first year, with figures, is a negotiating position rather than a complaint.

Plan the first ninety days before you sign

The handover period decides whether you keep what you paid for.

Customers are loyal to a person as much as to a name, so a departing owner who introduces you properly over a few weeks is worth negotiating for and worth paying for. Keeping the name, the phone number and the routines initially costs nothing and prevents the impression that everything has changed.

The changes you want to make will still be available in six months. Making them in week two, before you understand why things were done that way, is the most common way a good acquisition goes wrong.