3 considerations to make before buying a business
Buying a business marks an incredibly exciting moment in your career. Perhaps it’s your first foray into the business world. Or maybe you’re looking to expand your portfolio. Either way, buying a pre-existing business is often easier and cheaper than starting from scratch. But that isn’t to say it’s a decision that should be rushed.
We’ve put together three important considerations for you to make before closing on any deals. At any given time, it’s estimated that there are fifteen prospective buyers for any one business on the market. So while you won’t have the luxury of endless time to make your decision, these three considerations ensure you’re making a smart and informed decision regarding your new purchase.
Why is it being sold?
This one is relatively simple. You want to find out what the seller’s motive for selling is. You want to explore this in-depth before tying yourself to any business.
This isn’t to say there will always be something wrong or failing about the business; sometimes they’ll be selling just because it makes financial sense or is in keeping with their long-term business plan.
But, sometimes there will be something about the business that’s making it impossible for them to keep. And, if they want the business sold quickly, they may be hesitant to give you all the information.
To avoid coming up against issues once the business changes hands, take the time to explore the reason behind the sale – whether this is by asking the seller directly, or doing your own research.
Have a clear goal in mind
When you start to look around for a business to buy, make sure you have a clear goal and strategy in mind. Ask yourself questions such as:
- Why do you want to buy a business?
- What are your short- and long-term plans once you buy?
- How does this prospective business fit into your plans?
- Do you want a business that requires very little work and will instantly generate you an income each year?
- Do you want a smaller business that you can scale up and add value to in order to generate a profit when selling in the future?
Figuring out your own motivations and goals helps to prevent you from rushing a decision.
Sometimes, the excitement of buying a business takes over your reason and logic, leading you to buy a business for the wrong reasons or settling for a business that doesn’t quite meet your criteria or expectations.
Your requirements and plan should remain in the forefront of your mind through the entire search and buying process.
Consider the business’s wider reputation
There’s only so much you can learn from the data given to you by a seller. Sure, they can tell you the profit margins, income, running costs, and plenty of other cold, hard facts about the business. But they can’t tell you what current customers or clients think and about the general reputation of the business.
Take some time to explore review websites, social media, and news sites to see what people have to say about the business. And make sure there’s no bad press circulating around. All these things will factor into a business’s profitability and you want to be aware of them sooner rather than later.
Buying a business can be a great way of expanding your portfolio and increasing your income. But as with anything, there are elements of risk involved. By making important considerations like these throughout the process, you ensure you’re making the best decisions for you and your financial situation.
At Big Hand, we’re experts in all things business. From buying and selling, to bookkeeping and growing your business, we’re on-hand to provide the valuable, professional advice and insight you need to succeed. If you have any questions, give us a call on 0161 327 2911.