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Buying advice: the IT entrepreneur

Interview with...

Salman Mahmood
Computer science graduate with three IT businesses
Business name:
IT services
When bought:
Two years ago
Price paid:
ThinkstockPhotos 122584470

Having bought three businesses and sold one, Salman Mahmood is an experienced and bold entrepreneur

His acquisitions have all been in the IT sector, reflecting his background in computer science. His first acquisition was a computer software company, while more recently he has bought a graphic design company.

You can be in business from day one. Setting up a business can be more risky

Salman Mahmood, IT business buyer

More control

When it comes to weighing up the relative merits of buying a business and starting up, Salman has no doubts on his preferred route.

"You have more control," he says of buying a business, "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."

However, Salman does concede that "finding the right business to buy can be very time-consuming".

"The key to being successful is finding the right business quickly and effectively."

Doing so cheaply, is tricky.

"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 identify, from thousands of choices, the right business to bid for?

"I use the internet a lot," he explains. "If I see anything that catches my eye, I request more details.

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 for 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."

The quality of the existing staff is not a make or break factor to Salman.

"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 insists. "Which business doesn't?"

"Well, that's not strictly true," he says, clarifying his position. "The trick is to buy a business with potential, but not pay for it. That's the trick."

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."

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