7 Things I Look For When Buying A Business [M&A]

In this episode of 'Tej Talks,' host Tej breaks down the seven key factors he evaluates when purchasing a business, emphasizing that while these criteria apply broadly across industries, they must be assessed in context. He begins with financial health, stressing that profit margin relative to turnover is more telling than absolute revenue—aiming for at least 25-30% profit on a £1M turnover, with a preference for businesses that are profitable without excessive operational complexity. He highlights the importance of client diversity: avoiding both too many small clients (which increase admin burden) and over-reliance on a few large ones (which create concentration risk). Staffing structure and client type—commercial, domestic, B2B, B2C—are also critical, especially in sectors like care or education where policy changes can drastically affect value. Tej underscores the need to assess management structure, owner involvement, and hidden costs such as personal expenses disguised as business ones (e.g., luxury cars, inflated expenses). He warns against overvaluing businesses with short operating histories and stresses the importance of due diligence, especially around deferred taxes and accruals. Ultimately, he argues that every business must be viewed as part of a larger ecosystem, and no single metric tells the full story—making expert mentorship invaluable.