Advice Business

What to look for when buying a business

Written by Frank Kremer

Want to start a business in 2017? If you are unable to decide on an idea, know that there are plenty of owners that are looking to sell companies with a proven track record of profitability.

However, not all businesses are created equal. Some may not be as healthy as they appear on paper, while others may not be a good fit for your life.

In order to make sure that you end up as successful as Marc J Leder, read on below so that you will know what to look for when buying a business.

1) Why are the owners selling it?

Why the seller is divesting themselves from their business?

Are they looking for a change of pace in their life?

Are they looking to cash out prior to retirement?

…or are they desperately looking for a sucker to take the reins of a crippled business?

While there are plenty of legitimate reasons why owners seek to sell their businesses, you must always be vigilant for signs of trouble.

Is the industry in which the company is situated going through an economic crisis?

Is the owner being pursued by debt collectors?

Has this company been sued?

By doing your homework, you can save yourself from inheriting a massive headache.

2) How did the owner arrive at their asking price?

Most business owners are irrational human beings just like the rest of us. Knowing this, it should not come as a shock that many business valuations are not based on cold hard statistics, but on ridiculous reasons, such as the amount of money they’ll need for a down payment on that posh beach condo in Cancun.

Once you get a sense of how much a particular business is really worth, you can then call out the buyer on their pricing rationale.

Do this in a tactful manner, and you may be able to negotiate your way to a much better deal.

3) Is it a good fit for your life?

Often, an aspiring business owner will pursue a business opportunity without thinking about whether it would be a good fit for their lifestyle.

Running a business will take up copious amounts of your time. From day one, you will have to spend many months learning the ropes before you will have the opportunity to remove yourself from its processes. As a result, you need to be comfortable with this enterprise becoming a central component of your life.

Do you mind commuting, or do you want the office to be situated within a short distance from your home?

Do you thrive off the stress of running a sizable business, or are you more comfortable in an environment where everyone knows each other?

Do you enjoy traveling for business, or do you loathe it?

Honestly answering these questions and others will ensure that the business you are about to purchase doesn’t end up running you into the ground.

4) Are there documented operating procedures already in place?

Some business owners run their enterprises by the seat of their pants, while others have created manuals for every department.

Unless you have a taste for adventure, we recommend seeking out that businesses that have documented operating procedures already in place.

This will save you from having to go through the frustrating experience of learning how a business works by going through the process of trial and error.

 

 

 

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Frank Kremer

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