I am coming up to being able to withdraw a tax-free lump sum from one of my pensions, in the next few months. This will give me around £50,000 to do something with. I invest in property and so buying another buy to let property was my first thought. However, I do wonder if I should diversify into buying a business. In this post I explore the best small businesses to buy in the UK, if you have up to £50,000 to invest.
One of the tenets of wealth creation is owning your own business. This could be something you build up from scratch. However, growing a business is a long-term investment of time and energy. Buying a viable business, however, can be a shortcut to cash flow and financial freedom, especially if it’s already operating with customers, revenue, and systems in place.
If you have a budget of up to £50,000, you’re mostly looking at small, local service businesses, online businesses or distressed or owner-retiring businesses.
1. Local Trades & Services
Many of these are what you would deem “boring” businesses. They don’t really excite you and they are not cutting edge and high tech, but they are steady, essential, and often undervalued.
Here are some examples of some such “boring” businesses:
- Cleaning business (domestic or commercial)
- Window cleaning route
- Mobile car valeting
- Garden maintenance/landscaping
- Handyman or property maintenance
- Oven or carpet cleaning
You can see from this list that they are hands-on and practical services that people need day to day. In this age of artificial intelligence and robots, replacing jobs, we are a long way from these businesses being automated.
Advantages of local trades and services
These services are ongoing and never ending. Stuff will always need re-cleaning, lawns will keep growing and things will need fixing. You will therefore have recurring clients, who keep needing your service. If you’ve done an excellent job, at a reasonable price, they will come back to you.
They have low overheads. Once you have the initial equipment and transport, there is not much more in terms of costs to outlay. If you are buying a current viable business then you should be getting the equipment as well.
Disadvantages
One of the main disadvantages of these types of business is that they are owner dependent. This means that you will have to show up and do the work yourself, or hire staff, with all the issues and costs that comes with.
This also means that they are location specific, which means that you might be stuck in a particular area.
These are usually under-priced services. After costs have been taken out, you may not get more than minimum wage to show for it unless you scale up the business.
2. Online & Digital Businesses
Online businesses are what people think about these days when we talk about small business. It can take years to build up a big enough following online to be able to “monetise.” However, don’t discount buying an online or digital business. You can buy businesses like these for 2–3 times the annual net profit. That would be considered a low multiple, meaning the businesses are usually cheaper relative to other types of business. Many online businesses can be purchased for less than £50k.
Here are some examples of some online and digital businesses:
- Niche content websites (monetised via ads or affiliate)
- E-commerce stores (drop shipping or stocked)
- Amazon FBA micro-brands
- Subscription box businesses
- Print-on-demand Shopify stores
- Small digital product businesses (eBooks, courses)
Advantages of an online or digital business
Unlike a service business these can be operated from anywhere. All you theoretically need is a laptop and reliable internet connection.
Many of these businesses can be automated easily, so that you can set them up once and you just need to maintain them. They are also easily scalable; if the business is profitable now, even with paid ads, then the scaled-up business should also be profitable.
Disadvantages
If the business relies solely on Search Engine Optimisation to drive traffic to the website, then any change in the Search Engine’s algorithm could reduce traffic drastically. Alternatively, if you rely on paid adverts, this could be affected by competition. If more competitors pay for the same keywords, then the cost per click will go up. This could eat into your profitability.
The remedy to this reliance on paid ads and SEO is to make sure your business model can adapt.
3. Property-Adjacent Businesses
As I invest in property myself, I will also suggest a category of small business that is aligned with this. You can find small businesses serving landlords or tenants, for instance:
- Inventory clerk services
- Lettings compliance services (EPC, gas certs)
- HMO cleaning contracts
- Property sourcing (with client list and brand)
Advantages
Unlike property itself, these types of business have a low initial capital requirement. They also align with my investing background.
Disadvantages
Watch out for being dependent on 1–2 clients. If you were to lose one or both of these clients, that would be a blow to your income. Therefore, look to ramp up the business with new clients. You should always have a regular sales and marketing campaign going, anyway.
4. Franchise or License Deals
Here are some examples of micro-franchises or license opportunities that are available below £50k. There are many others.
Examples:
- Oven cleaning franchise
- Kids’ activity clubs
- Mobile coffee vans
- Dog walking/pet care franchises
Benefits of Franchise Deals
With franchise or license deals you should get a readymade brand, which you can just plug into. There will also be systems already in place, such as marketing, fulfilment and customer service etc.
Disadvantages of Franchises
Aside from the initial purchase price, franchises also have ongoing fees, which you will have to cover. You may also be restricted to operating in a certain geographical area. There may also be restrictions to how you market the business. Even though you are a business owner, it might feel like you are an employee.
5. Buying Businesses From Retiring Owners
Many Boomer business owners are now retiring and they want to take their well-earned profits and enjoy the money. This means that these businesses are coming up for sale. Here are just a few examples:
- Small accountancy/bookkeeping firm
- Driving school
- Lifestyle retailer
- Niche B2B service (e.g. signage, engraving, embroidery)
The Benefits of Buying from a Retiring Owner
For long established businesses there will be built-in goodwill and reputation, which you can continue.
Disadvantages
Watch out for obsolete systems, however this can be a potential win, if you can bring the systems up to date without too much disruption.
Make sure that you consider staff (and customer) loyalty to the founder. Be prepared to spend at least 3-12 months before the purchase working inside the business with the outgoing owner, so there is a smooth transition.
Where to Find Small Businesses for Sale:
There are many places to find small businesses for sale but here are a few recommended portals to try first.
Daltons Business
Daltons Business is the UK’s largest and most popular Businesses For Sale portal. Their website states their objective is to be the place where buyers can find details of all small to medium sized businesses and franchises for sale.
BusinessesForSale.com
An international business advertising platform, businessesforsale.com have been experts for over 20 years, successfully supporting thousands of business owners, entrepreneurs, brokers, and franchisors.
RightBiz.co.uk
The UK’s No.1 Business Marketplace. Check out rightbiz.co.uk
See Also:
- Facebook Groups
- Local B2B networks
- Word of mouth
- Letters to local owners
Due Diligence
When you are looking at potential businesses to purchase, there will be some opportunities that just look too good to be true. This is why it is important to do your due diligence. Think of it like buying a new home. You fall in love with the property, but you would make sure to get all the searches and surveys done before you buy. Buying a business is no different, so here’s a quick checklist of what to check:
1. Check the Financials
If you do find a business in your searches, ask for 3 years of financial reports to go through. These might not be forthcoming. This would therefore be a red flag for me. If you are supplied with the necessary reports, then check the company’s profitability. It might be worthwhile getting an accountant to give them the once-over as well.
2. Check for owner-dependency
As we discussed earlier for some service businesses, they may be owner dependent. This means in effect you are buying a job, which could be little more than minimum wage. Think – ‘what would happen if you didn’t work for a fortnight?’ Would the income dry up? If the business is owner dependent, that’s not necessarily a deal breaker. Could you hire staff or automate processes? Are you prepared to work the hours to do the work and also put the systems in place to eventually extricate yourself from the business?
3. Verify recurring vs one-off income
When looking through the books, you should be able to distinguish what is recurring income and what is one-off project work. If most of the income is one-off, this means you will have to spend more time on sales and marketing, to replace this income.
4. Look for digital presence & reviews
Do look through all their reviews online. If you search [company name]-reviews this should be a useful source of feedback. Read all the reviews. Expect some negative reviews, which is quite normal. Up to 10% negative reviews would be acceptable. Be very suspicious if there are no negative reviews and everything is glowing. I would smell a rat here, as even the best business will not satisfy everybody all the time.
5. Find out why it’s being sold
Ask why the business is being sold. Don’t just take the word of the Sales Agency, also ask the owner directly. Do the motivations ring true? In service businesses you maybe working in the business during a hand-over period. You will then get a feel for the motives of the selling owner.
Adding Value to the Business
When you buy a small business that’s functional, but off-line, you can add a digital layer. One example of this could be to add an online booking & payment function. This could even run to phone apps. Other examples of adding digitisation are:
- content marketing
- building an email list
- collating reviews
In this way you will be scaling the business more smartly than the original owner ever did.
Final Thoughts
With £50,000 in your pocket, you’re not buying the next Tesla, but you could buy yourself time, freedom and a consistent income stream. Whether it’s a local service, a digital play, or a retiring owner’s legacy, the right small business can pay you every month and grow in value over time. Do your due diligence and seek professional advice before making any purchase.
If you don’t have the £50k yet, then my free resource the Deposit Blueprint will help you get a lump sum for investing as soon as possible.