Buying a Business Under Management? Here's What to Consider

by Vanessa Lovie 5th of March, 2024

Buying a Business Under Management? Here's What to Consider.

Buying a business under management is a hot search among business owners who are looking for an investment, or their second or third business. Finding a business that is already running under management means the owner can invest limited time into the daily operations of the business and work on growing the businesses profits.

If your looking to buy a business under management, dont buy until you have considered these elements.

What Does Buying a Business Under Mangement Mean?

Buying a business already under management means there is a full team in place that handle the day to day operations of the business. Essentially you are buying a functioning business that requires very little “hands on” input from you as an owner.

Take for an example buying a restaurant under management. You would expect there to be a chef wait staff and a general manager who oversees the daily operations of the restaurant.

There are different levels of interaction required by a business owner when they buy a business under management. It all depends on the setup of the business and the systems they have in place. Whether the current management is in charge of daily operations only, or is also in charge of finances, setting budgets and forecasting. Every business is different in its setup.

There are typically more benefits to buying a business under management then there are disadvantages although it is important to consider both.

Benefits of Buying a Business Under Management

There is a fully trained team in place that can manage the day to day operations of the business. This can help ensure a smooth transition, maintaining relationships with employees, customers, and suppliers.
As the business owner you can work on growing profits and improving the business without getting ‘bogged down’ with day to day tasks. The business likely has an existing market presence and brand recognition, which can be used by you for further growth.
Buying this type of business can be a good investment option if you don’t have the time to spend working in the business.
You can buy the business and take over the management aspect, which means an increased income for you as you can receive the current management salary plus any owners profits.
When buying a business, if you do your due diligence correctly, you will be able to see the owners profits, management salaries, employee salaries etc. It will help you gauge what your income will be as an owner of that business. Lenders may be more willing to finance the purchase of an established business with a management team and a stable history.
The business may only require limited hours a week from you, leaving you more time to further grow and develop the business or run other businesses instead. Passive ownership can allow you to focus your time elsewhere.

Disadvantages of Buying a Business Under Management

The employee team is fully established which means you might find some resistance to change. The culture established by the current management might not align with the new owner's style, potentially leading to conflict.
The profits to the owner may not be as high since a lot of expense is going towards employee wages. Typically businesses with established management teams and proven track records often command higher purchase prices.
You need solid business experience and the ability to manage various facets of the business, such as human resources, marketing, finances and operations. With limited experience you may see the business struggle after purchase.

It is popular to see hospitality businesses run under management. Businesses like cafes, restaurants and takeaways often have a team and management in place for the day to day operations such as making coffee, ordering supplies, customer service, managing team rosters etc. The business owner is often the overseer of operations and ensuring budgets and targets are being met.

It's important when buying any business that you consult with an accountant and solicitor and perform due diligence so you are aware of what you are purchasing. When buying a business under management you want to be sure you are fully aware of business profits and expenses.

Originally published June 2020. Updated March 2024.

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