24/04/2009 by info.

That of course is the alternative that people have.

Many budding entrepreneurs try to establish a business, a quick search on google suggests that anything up to 90% of new businesses fail in their first year. Now that may overstate the figures, however the number of failures is quite high.

A study in Ohio State University tracked new restaurants opening from 1996-1999.

The survival rates were as follows:

• First year: 85%
• Second: 70%
• Third: 62%
• Fourth: 55%
• Fifth: 50%
• Sixth: 47%
• Seventh: 44%
• Eighth: 41%
• Ninth: 38%
• Tenth: 35%

Once you’ve hit five years, your odds of survival go way up.

What does this show?

Well firstly that new business owners often underestimate what is needed to start a restaurant, they are often undercapitalised and simply don’t have the skills needed to be successful.

Almost as importantly it shows that buying a business is not as risky. If you buy a restaurant that has been trading for 5 years, the chances of you being unsuccessful are significantly reduced.

Why is this? It is to do with location, location, and location.

There are plenty of empty shops and premises as a result of the recession but these will be the locations where previously businesses have failed, other restaurants, takeaways, cafes, pubs etc.

Often it doesn’t matter how good a chef or manager you may be, the most important criteria for being successful is having the right location, so it is better to buy someone out from a primary location than try to establish yourself in a secondary position.

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24/04/2009 by info.

Business Owners hardly ever take professional advice before placing their business on the market.

I often ask the question to prospective clients “What does your accountant advise over the sale of your business?” and they look at me blankly. They hadn’t even considered telling their accountant about their proposed sale, because of course it would cost them money to telephone them.

Many of them I am sure complete the transaction, and then find out that they actually have tax to pay on the sale of their business. Now I am sure that Alistair Darling would be very happy about that situation, after all he needs to increase his tax revenues! But for the business seller it is too late, they suddenly find that the net proceeds from their sale isn’t as high as they thought it would be.

If I could give you one bit of advice before placing your business on the market it would be, before you contact a business transfer agent you should be contacting your accountant and consider the amount of Tax payable your in their calculations.

It may change your plans.

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