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Things You Need to Know & Think About Before Buying a Business

Buying an existing business offers the opportunity to become an entrepreneur quickly. The business you’re buying often comes with a staff in already in place, they are trained and experienced in the business, and there is already an established customer base with existing relationships.

Before you embark on the long and emotional process of buying a business, there a few things to consider and keep in mind as you evaluate opportunities.

Why is the current owner selling?

This is crucial to know and understand as you evaluate opportunities.

Is the business trending up or down? Is it profitable? 

When you looked at profitability you probably got a sense of if the business was in growth-mode or declining. Once you know which direction it’s going, you can ask followup questions to understand the reasons.

Are there any outside impactors that could help or hurt the business?

You never want to be surprised by things outside your control (and sometimes you can’t control them), but you can at least be preapred for things in the marketplace.

Does the business have a good reputation?

Ask around. Ask their competitors. Check Facebook, Google, and Yelp Reviews.

What happens with accounts receivable?

Chances are, some of the business’s customers will owe the seller money on the closing date. Who will be responsible for collecting these overdue debts? There are only two ways to handle this: Either you purchase the accounts receivable at closing (for a discount, to reflect the fact that some of these folks won’t pay up), or you let the seller collect them at his leisure.

Are you getting everything you need to take over the business like customer lists, trademarks, patents, etc.?

Obviously the more you acquire, the better!

Will key employees stay?

In the early days, institutional knowledge is very valuable so you will likely want to ensure as many employees stay on as possible (if it makes sense for the business, obviously).

Who are the competitors in the area?

Take the time to understand the competition to see where there may be opportunities or challenges for you to compete should you buy the business.

 

Answers to these questions are key to making the final decision to purchase an existing business.

Connie Mendrys

cmendrys@tbbinc.com

515-986-0741

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