Important Things to Know Before Buying a Business
Starting from scratch might be very daunting for some starting entrepreneurs. They might find it very difficult to build a customer base, develop new products, handle initial marketing campaign or hire reliable employees.
To sidestep these birth pains, one alternative is to buy an existing business and expand it to reap more profits. All systems are already in place and you might just need to tweak it to be more efficient. When buying a business, you should carefully consider the following:
- Reasons for selling. If it is so good, why sell it? Don’t expect some owners to tell you the truth but you should find ways to validate the reasons provided. You can talk to some of the employees or other business partners.
- Business image. Although having a negative business reputation gives you the power to bargain for a lower acquisition cost, it can hurt the future operations of your business. You should meet with several customers and suppliers to gauge the existing business image.
- Financial statements and sales records. Get the financial statements for the last 5 years and hire an accountant to audit all the books for accuracy and consistency with tax returns. This will also give you a good estimate of business profitability and much how liabilities you have to assume.
- Legal documents. Some of the important legal contracts include articles of incorporation, purchase agreements, sales contracts, employment contracts, copyrights, and trademarks. You should consult with legal experts to be more accurate.
