If you are interested in buying a business, do your research beforehand so that you don’t have any surprises coming your way. Apart from the common things like financial records you should also take a look at the economic stability of the domain and be a bit critical of the asking price. However, this does not mean that you have all the aspects of the business covered. Therefore, if you’re looking to buy a business, check the following areas to make sure you’re taking the right decision.
1. It is fundamental that you know why the particular business you are interested to purchase, is for sale. It is common to be a bit skeptical right before you are going to make a big purchase. After all, it will be a decision that will make or break your future business. If the business owner cannot offer a compelling argument as to why he or she is selling the business, that should raise some concerns. In almost every case I have encountered, entrepreneurs are not really all that willing to sell their businesses and I understand the reason behind it. Imagine if it were your business and you needed or wanted to sell it. It would be pretty difficult to part ways easily considering the hours of labor, nerves and satisfaction you’ve put into it, whether we’re talking about the good times or the bad ones. In every instance, when entrepreneurs sell their businesses they always have a compelling reason so make sure you find out which is.
2. Make sure you investigate the customer concentration area. This step is essential before you purchase a business given the fact that some businesses only rely on one or two strategic customers that bring in the largest amount of the revenue. However, this is not necessarily a bad thing, but you need to be informed whether these customers will continue to do business with you after the purchase or they prefer to move their business elsewhere. If the customers decide to leave, you may be left scratching your head and banging it at the walls trying to find new customers. Before purchasing a business, try and assess the situation as best as possible and determine if it could still thrive without those certain customers. Also, make sure you take the following question into account: “Could the lost revenue be recovered quickly or will it be a bad investment on your part?“. Before making a decision, make sure you know who your key customers are so that you can connect faster and easier with them.
3. Let’s say you are one step closer to sealing the deal. Before actually signing the papers, discuss with the business owner and ask him or her about the most important people in the company. This will help you identify the key employees. It is a well-known fact that after a business has switched hands, an adjustment period is in order. One of the best ways to facilitate this transition is to identify and convince key employees to remain part of your team. Do your homework beforehand and see which staff members are essential to the prosperity of the business and share with them your vision and try and convince them to take part in what will hopefully prove to be a beneficial arrangement.
4. Given the fact that most businesses have to comply with some government regulations, before actually purchasing the business you are interested in buying, you should have solid knowledge of the regulations imposed for your business. Also, talk to people that have political connections and investigate whether some regulations may change over time and how they can affect your business. This is a crucial thing to do considering that only one regulation could turn a prosperous business into an unprofitable one overnight. Talking to the owner of the business is not enough, you should also talk to other business owners that work in the same industry.
Many people consider that buying a business is easier than building it from the ground up given the reputation and customer base that are already established. In the long run, these aspects may prove to be great assets but don’t let that influence your decision too much and investigate thoroughly before making a purchase that you might end up regretting.
