Many entrepreneurs talk about starting their own businesses. But there is a lot of value in buying an existing business and the challenge of growing a company created by someone else.
A few important factors should be considered before purchasing a business. In addition, some red flags may show up that will deter you from such an investment. Read on to see what you should consider before taking the plunge.
5 Things to Consider Before Buying a Business
Buying a business that is already up and running is different from starting your own from scratch. Know that purchasing a business comes with the good and bad of the company. Understand why they’re selling before you sign the contract.
Here are other things to consider:
- Research the History: Learn the passion behind the beginning of the business: how the idea started, how far they have grown, and what setbacks came up.
- Uncover the Skeletons: Every business has skeletons in their closet that do not show up on paper. Discover what they are trying to hide from you by asking hard questions: Why do they want to sell? Have they ever been hit with lawsuits? What is the worst customer feedback you’ve received?
- Know the Key Demographic: What is the business’s demographic, and is there room for growth?
- Assess the Current Assets: If the company has existing equipment, take a look at the condition of the assets before buying.
- Determine How You Would Add Value: Are you interested in the company enough to build the business and expand it to something of greater value?
When you break down the details of a company up for sale, you may be excited about the match, or you may decide to move on to the next prospect. If you have to convince yourself to be interested in a company, it is probably best to wait for a better sale to come along.
It’s impossible to find an existing company without any obstacles to overcome. But if the red flags keep piling up, do not let yourself invest in a money pit. Instead, meet with a lawyer to discuss the process of buying the right company for your next business venture.
You don’t want to buy a business without expert advice on how to find the maximum value. Shoup Legal is here to help! Contact us at (951) 455-4114 or email us at [email protected].