When considering the purchase of a business, several things need to be considered. Below are just a few pointers.
First, it has to make sense for you. Are you prepared to make the necessary sacrifices to make your venture successful? You may work long hours, have to borrow money, have less personal and family time to spend, etc.
Now, this means different things to different people. Only you can decide if the opportunity is right for you. Before making such a life changing decision, make sure to ask family, friends, and trusted advisors what they think of your decision.
Second, the proof is in the numbers. Don’t get caught up in the excitement of buying a particular business. Ask the owner to prove their financials. If you decide to buy the business and make changes or add new expenditures, factor in how that may affect the business and your profitability.
How has the operation been performing? Is there room to grow the business? If you aren’t comfortable with the performance of the business, the answers given by the seller, etc., proceed with caution.
Third, ask yourself “what are my objectives?” Is this a knee-jerk reaction to your current work situation? Don’t buy a business just to get out of another situation.
You should do lots of research and due diligence on the business/industry that you plan to put your blood, sweat, tears, and hard earned money in.
Carefully consider if this will be something you plan to improve and flip or hang onto. What are you willing to do or how much time/money is needed? Are there other resources needed to offer the best chance of success for this venture?
Finally, ask yourself “is there meat left on the bone?” By this, I mean has the previous owner(s) maximized all of the potential the business has or can you as the new owner come in and “move the needle?”
Consider the financial state of the business. Can prices be raised without losing customers? Can expenses be trimmed without losing output?
Furthermore, are there other areas where you can come in and improve things? Do you see opportunities to bring in specialized skills in areas the business sorely lacks? Is the right “team” in place?
This is by no means an all-encompassing list of what to consider when buying a business, but I hope it acts to stimulate thought and gives you some good pointers to get started. Buying a business is a big deal. Don’t make a decision until you are ready!
Call on Van Daughtry Consulting, LLC and let us know how we can help.
Phone: (919) 780-9144