Last Updated on Dec 18, 2019 by James W
If you are looking forward to becoming a business owner, then one option you should consider is buying a business that is already established. There are many factors that you need to consider before doing this. Failure to make the proper assessments before purchasing the business is one mistake that you should avoid. Making a rash decision won’t lead you to success. It is deemed wise to plan carefully before buying a business. The following five considerations will help you in determining whether it’s better to buy a company for sale or not.
- The sellers motive
One thing that the buyers should first ask the buyer is his reasons for wanting to sell the business. Ensure that the seller’s reasons for selling the company are genuine and they don’t have anything to do with the productiveness and integrity of the business. For example, there is a huge difference between the business being sold because it’s not productive and the business owner wants to retire from being a business owner. Make sure that you can determine the difference when talking to a business owner who is looking to sell their business.
2. The sales blueprint
Assess the periodic sales of the business and its peak and off-peak seasons. The patterns associated with the rise and fall of the sales can give you a clear view of the efficiency of the business. It will also help you in predicting the output of the company. This is especially important when you are buying a business in a local market. For example, if you are looking for a business for sale in Miami, make sure that you know how the industry you are considering buying a business in fares in that area.
3. Financial mileage
The primary goal of a business is making profits. The successfulness of a business will be determined by how much profit the business makes. A profit which is continuously increasing shows that a service or product is exemplary. Therefore, taking a look at the past financial records of the business before buying it can be quite helpful.
4. Legal agreements
The legal contracts which were signed between suppliers and customers along any other legal documents must be scrutinized. Also, other legal documents such as insurance policies and employment agreements must be screened to avoid misunderstandings afterwards.
5. Business framework
Examining the business structure can help you in determining how well things have been working in that business for the last couple of months. This is a crucial thing to know because if the setup of the company is unstable, you might have problems with the business later.
6. Business Alliances
Before buying the business, ensure that you find out if one individual solely owns the business or if it’s a joint partnership. If the company is of a joint partnership find out whether the partners will exit the business or whether they will continue with it. All the details should be discussed transparently and thoroughly and also signed in case you go ahead with the deal.
7. Buyers interest
Prior to buying a business, you first need to know what interest you most in a business and then make an informed decision based on that. You might want to buy an already established company, but later it turns out to be a wrong choice because you don’t have the needed skills to run it effectively. Remember that passion and expertise are an important part of running any successful business, whether you started it yourself or not.
8. The staff
It’s important to know your employees, their working relationships and the contracts they had signed with the business that you are going to acquire. This will guide you in knowing whether you will keep those employees or hire new ones.
9. Tax implications
There are going to be a few tax implications on the business which you want to purchase. As the buyer, you should make yourself accustomed to the taxes which are applied to the business.
10. Business assets
Ask for the total number of assets which are owned by the business. You should carefully research this since you might have to use a considerable sum of money on the reinvigoration of the business which you are buying.
11. The customer’s stance
Access all feedback, both negative and positive, from the services that are offered to the customers by the business. If the amount of negative feedback is high, then you will automatically know that the business is not operating well and have an idea of the places where it needs to improve.
12. Standing liabilities
Find out if the business has debts. If there are outstanding debts or non-payments, then this could be a sign that the business is unstable. You can also check for refunds and warranties that are still available.
Knowing all the aspects of a business for sale can help you in deciding whether it’s worthwhile buying that business or not. Researching before buying the business can save you the trouble of purchasing a company which won’t be profitable for you.