We have been coming to Betty’s Bay since 2005 when we purchased our Holiday home, but have taken up permanent residence in the Village since June 2012. Over the years, I have been alarmed by the number of businesses that have opened and closed; or regularly changed ownership a number of times.

It is not easy to trade in a “holiday” town like Betty’s Bay or in most of the Overstrand area, for that matter; especially where seasonality plays a big part and is a contributes to a business’ demise and is a threat to business owners, if they don’t plan correctly and provide sufficiently for the lean or negative cash flow periods.

There are many pitfalls when buying a purchasing a business – do your homework thoroughly and be careful that you don’t overpay for a business that is basically dependent on 3 good months trading in the year when visitors are in town. Look at planning and creating additional revenue streams that cater to the “permanent” residents in the area, so as to ensure that they support local businesses and traders.

Be meticulous when preparing a cash flow forecast and set aside funds that can support the business during the lean months. It’s exciting to see all the cash roll in during the season, but plan ahead for the slow months and keep a cash reserve to cater for those times.

BUYING A BUSINESS - WHAT TO LOOK FOR

1. What are the reasons for selling?
2. What track record does the business have?
3. Identify key customers and suppliers and establish their trading terms.
4. View and obtain copies of all legal contracts. Pay special attention to the lease agreement covering Business premises.
5. Establish what assets are encumbered.
6. Ask for details of current or pending litigation that the Business might be involved in.
7. Establish external factors that might negatively affect the business.
8. Find out whether any other party holds any right or title to the business.
9. Ensure that there are no disputes with the Revenue Service that might impact on future payments.
10. Do not accept any figures at face value. Have them checked out by a Professional and request certification by the External Accountant to the Business.
11. Is the Seller prepared to sign a Restraint of Trade agreement when a sale is concluded?

THE BUYING PROCESS
1. Consider, and make a decision to buy a business.
2. Research and educate yourself as to the type of business you wish to buy.
3. Determine how much you can afford to pay.
4. Search for sources that list businesses for sale.
5. Engage professional advisors.
6. Evaluate the businesses being offered for sale.
7. Place an option on the business in which you are interested.
8. Negotiate with the sellers of the business.
9. Submit an offer subject to a due diligence.
10. Perform a due diligence on the business.
11. Structure and complete documentation for the purchase.
12. Obtain a contingent financing commitment.
13. Sign the purchase agreement.
14. Satisfy the conditions to the closing.
15. Close the purchase.
There are many other issues that need to be addressed and more questions need to be asked. If in doubt, consult a Professional to assist you.