8 Tips on Buying a Business - Things to Watch Out For When Buying a Small Business
Business Buying Tips
When you are buying an existing business, you hope you are eventually going to find a good deal. You also hope that you are not buying into a problem. Many people seek tips on buying a business or tips on buying an existing small business. Here, are 8 tips for buying a business, all from personal experience.
1. Get Hard Proof of ALL Numbers
One of the first tips on buying an existing business I can give is to get hard copies of all the numbers. Get copies of the cash flow, income projections, bills, loans, anything that has to do with money coming into and out of th
e business. Don’t rely on anyone’s word.
2. If It Doesn’t Feel Right, Walk Away
This is one of the main tips on buying a business, and one I learned from experience. If something, anything, about what you are seeing before the purchase doesn’t feel right, you don’t have to go through with the deal.
3. Use a Third Set of Eyes to Look It All Over
One of many tips on buying a small business you will hear is to have another set of eyes look over everything. Your best bet is to use professionals, but another businessman can also tell you if something doesn’t look right.
4. Don’t Rush Or Get Pushed Into The Business
If you rush into a sale you could end up in either legal or financial disaster which you cannot recover from. Along this line, if you feel as if the owner is trying to push you toward buying the business, take this as a warning sign as this may show desperation to get out of an unworkable situation for them.
5. Talk To Everyone Involved With The Business
By this I mean everyone. Talk to the vendors, the landlord, past customers, and financial people. You can talk to employees, but you should tell the current owner, and you should not let on you are looking to buy the business.
6. Check The Regulations
Another of the important tips on buying a business is to check the local regulations for the business. Has the business become a nuisance for the town? Are the zoning laws changing in the next few years? Will you be required to bring everything up to current codes if the business has been there for awhile?
7. Check Out Everything About The Business
Another one of my tips when buying an existing business is to gather information. This includes the owners. I once almost bought a small publication in Texas. When I didn’t like what I saw, I backed out. This is when I found there was an unknown partner, and the town was looking to have the publication move due to problems with the current owners. The building looked good in pictures, but was also behind in taxes and on the verge of being in violation of building codes.
8. Get Everything In Writing
This is the most important of my tips when buying a small business. It doesn’t matter who says what before the purchase, nothing is enforceable if it isn’t in writing. If you buy a business with cash and a handshake, you have no recourse should something go wrong or the previous owner defaulted on other obligations.
If you follow these tips you will, at the minimum, know every detail and every possible problem which may need resolution before you actually take possession of your new enterprise.
For more information, see this related article on due diligence and buying a business.
Image Credit: Wikimedia Commons
