| Buying a Business Case Study
| Age: | 31 | | CV: | Seven years experience of owning his own businesses. | | Key advice: | “Every business has potential.”
| Having bought three business and sold one, Salman Mahmood is already an experienced, wise and bold entrepreneur, at the young age of 31. The businesses he has bought have all been in the IT sector - reflecting his computer science background. His first acquisition was a computer software company and more recently he has bought a graphic design company. When it comes to weighing up the pros and cons of buying a business against starting up, Salman has no doubts on his preferred route. "You have more control," he states, "especially if you find a business with a high turnover, good contracts in place, customers and goodwill. "You can be in business from day one. Setting up a business can be more risky. "Finding the right business to buy can be very time consuming," he says. "The key to being successful is finding the right business - quickly and effectively." However, he adds: "If you wish to investigate a business you need to employ an accountant and a lawyer… and that is where the process can become expensive." So how does Salman go from looking at thousands of opportunities to making an offer on a business? "I use the internet a lot," he explains. "If I see anything that catches my eye I request more details. "Contact the seller directly" "A quick way of creating a shortlist from these summaries is to try and speak to the seller directly on the phone - even for just five minutes. That way, you can quickly work out whether the summary of the business is accurate." Once Salman has created a shortlist of opportunities he starts the investigation process. "One of the most important things I look for is existing contracts with clients – especially with a service business because that is where the value lies. "I ask myself, what will be the implications to the business if the client goes?" He also stresses that the right accountant or lawyer can be the difference between buying successfully or not. "If a solicitor takes too long in cementing the deal you run the risk of being outbid by a rival." Lockout agreement He advises fellow buyers to get a lockout agreement once they have found a business. "It's vital to do so - maybe with a deposit or a legally binding timeframe which can prevent you from being outbid." He is also very reluctant in buying a business based on the existing staff. "They could simply leave you," he says. "And then what? That is why it is important you have direct relevant experience of the business you are going to buy." His most treasured piece of advice, and something he has clearly subscribed to, revolves around the mercurial word 'potential'. "Every business has potential," he declares. "Which business doesn’t have potential?" I assume that Salman never buys a business with potential. Before he is misunderstood Salman quickly clarifies his position. "Well, that's not strictly true," he says. "The trick is to buy a business with potential but not pay for it. That's the trick." | 
