Industry sector:

Tool hire: Buy an existing business


You might decide to buy an existing tool hire business rather than start your own venture from scratch. Buying a going concern can mean that:

  • the premises, stock of hire tools, equipment and fittings are already in place
  • there are established customers
  • the business can generate income immediately
  • suppliers have been identified and relationships established with them
  • the business has a track record, which can help if you are looking for finance
  • staff may already be in place

However, look critically at any business that you are interested in to make sure that the price you negotiate with the seller is a fair one. Try to establish why the business is for sale - for example, is the owner keen to retire or is there another personal reason for selling up?

Your market research into the sector as a whole and the locality in particular will help you to establish whether or not the owner is selling because he or she can no longer generate enough income from the business. This may not necessarily deter you - many business people are confident that they can turn a failing business around. The important thing is to have established the current position so that the price you pay for the business is not too high.

Other matters to consider include:

  • how many tools and other pieces of equipment are included and what condition they are in. Are they modern, reliable and safe to operate?
  • the state of the premises, fittings and so on. Will you have to spend money refurbishing or replacing assets
  • the condition and value of any workshop equipment you are buying. Check this over carefully before agreeing a price
  • existing staff rights
  • the reputation of the business - does there appear to be a loyal core of regular users who would recommend the business to others? A search online for feedback and reviews could be worthwhile
  • how to retain key personnel once you've taken over
  • does the business owe money that you will be responsible for
  • if you are paying for goodwill, to what extent does this depend on the skills, contacts and personality of the seller

Ask your accountant to look critically at the business accounts for the past three years and discuss with them the selling price in the light of what the accounts reveal. Make sure you budget for other professional fees such as legal fees and valuation and survey costs.