Whether you own one business and want to buy another or instead of starting a business from the ground up you’re thinking of buying an existing business, you need to be careful to make sure you’re making the right decision.
There may be less risk in buying an existing business, compared to starting one yourself. There should be an existing client or customer base, good will towards the business in your community (assuming the business was well run) and an existing staff of employees.
The owner may also want to sell the business because things aren’t going well and wants to get out while he or she can. Though that may make the business less expensive to buy up front, it may require more of an investment in time and money to turn it around.
The federal Small Business Administration has a lot of information that could be very helpful to you. Your taxpayer dollars are funding the agency, so you might as well take advantage of it, including checking out their advice for buying a business.
What to consider before buying a business
Here are some things to think about when buying a business:
- There are many legal issues involved in owning and running a business so consult with an attorney before buying one. Sensible business owners, not just lawyers, would give you the same advice. I have helped many clients with their businesses and can help you avoid some potentially costly pitfalls.
- Unless you’re planning on hiring someone to manage this business for you, you will probably be spending a lot of time running this business. Will running a business, and the type of business you’re considering buying, be a good match for your personality, skills and goals? If there are aspects of the business that are not a good fit with your strengths, could you hire someone, or bring on a partner, who could address those areas?
- Doing your due diligence is key to successfully buying a business. You need to get all the facts before you can make a rational, informed decision that the return will justify the investment in time, money and energy.
- Discuss the business at length with the seller. If possible, talk to key current and former employees, suppliers, current or past partners.
- Have an accountant go over the books to make sure the business is as healthy as is claimed.
- A thorough Google search may uncover news stories the seller hopes you won’t find.
- Take a look at all the required licenses and permits. Is the current owner operating the business without the necessary approvals?
- Are there any zoning or environmental issues?
- Has the business been sued or investigated by a government agency? If so, why and when? Has the issue been resolved?
Buying the right business at the right time at the right price could be a blessing. If it’s not done properly, you may feel it’s a curse. If you are thinking about purchasing a business, contact my office so we can discuss your situation and how I can help you reach your goals.