Becoming a business owner is an exciting endeavor. Some look to build a business from the ground up. The startup phase is particularly grueling. Should you want to become a business owner, but bypass the startup phase, you may want to consider buying an already existing business. Just remember, however, that passing over the startup phase does not mean that you have little work ahead of you. Buying a business can help you pursue your passion while providing financial support. You need to be sure to take steps to prevent falling into common business buying pitfalls. Knowing what to avoid will help you be prepared.
Business Buying Pitfalls to Avoid
One of the biggest business buying pitfalls to avoid is not putting in the time and effort needed to find the right business to buy. The prospect of buying a business is exciting, but do not let that excitement push you to run into something too hastily. Look into the marketplace that falls in line with your minimum criteria. From there, you can pare down your choices even more based on other things that may be on your business buying “wish list.”
Avoid buying a business without performing due diligence. The more thorough, the better. Review the financial information the current business owner gives to you. Remember to take the information with a grain of salt as it is most likely being presented to you in the most favorable light. The owner, of course, wants to make the sale and so there is some inherent bias to be mindful of. Find out the answers to critical questions such as the exact debts and liabilities associated with the business and its assets. Research the market you are looking to enter and see what type of competition you may be up against. One of the most important things you can find out is the honest answer to why the current owner is selling. The reason for the sale can help you in the negotiating process. It can also help you understand some important and potentially very problematic aspects of the business as it currently stands.
As a prospective business buyer, you also need to take the time to honestly and realistically reflect on your strengths, skills, and knowledge base. Oftentimes, business buyers assume that they can seamlessly and successfully step into the shoes of the current owner and do as good of a job, if not better. This assumption can be costly. If you assume the role of an owner in a business that requires the owner to do frequent sales calls, but you are not a salesperson, this will be problematic to say the least. Reflect on your skillset. Know your strengths and look for a business where those strengths can be maximized.
Business Law Attorney
Not consulting with a professional prior to buying a business can also be a costly mistake. Purchasing a business is complicated and involves many complex parts. The Kumar Law Firm can provide you with the benefit of our experience in knowledge surrounding business and the law of business. We are here to protect your interests and help set you up for success in your business buying venture. Contact us today.