Self Business Appraisal

Introduction to the Business Appraisal Process

Having decided on the type of business that is likely to prove successful for you, given all the factors such as your personal skills, available time and personal motives, then it is important that you turn your attention to assessing the actual business itself.

The process of analysing an existing business before you buy it is known as ‘due diligence’. This task is an absolutely vital part of the purchasing decision. Similarly, the process of analysing a potential start-up is just as important, but is based more on projection and supposition, meaning that a greater degree of caution is needed.

Understanding Appraisal

Appraisals should be conducted under several distinctive headings. Having a firm idea of what these headings are and what you should be considering under these headings will keep you focussed and ensure that you do not miss any vital information.

Although the actual headings may differ depending on whether you are buying an existing business or starting a business from scratch (topics will be considered in greater depth later), the broad issues remain the same.

The basic areas that should be considered during an appraisal are as follows:

 legal;

 financial;

 market and demand;

 regulation; and

 skills available.

Conducting an appraisal in an objective way is vital and actually not as easy as you would imagine. It is very difficult not to become personally attached to an idea or to get over excited to the extent that you are blinded to some of the negative aspects of the potential business.

For this reason, once you have gathered all the relevant information, make sure that you ask a third party for advice, ideally someone with a good business knowledge to review your appraisal and the business plan that you have developed from the information gathered. Ask them to play devil’s advocate and to question you on your assumptions and projections. Ensuring that your appraisal is both objective and realistic will give your business the best possible chance of success and also the best possible chance of attracting investment or external financing.

Summary

 Regardless of what type of business you are considering buying, a detailed and objective appraisal is fundamental;

 certain topics must always be considered to ensure that you have left no stone unturned;

 always seek a second opinion, ideally from a business professional who can question your appraisal and plan and help thrash out any potential issues.