In this article we will take a look at five important questions for buyers to consider before signing on the dotted line. It is important to stay logical when you are in the process of buying a business. Carefully evaluate the business in a step-by-step manner. Let’s take a look at these five important questions for buyers to consider.
1. Do you have a personal interest in the business?
Owners have made businesses successful, even if they lack a personal interest in what is being sold. However, you might want to ask yourself if you do have a passion for the goods or services being offered by the business you are considering to purchase. A long-time commitment may be harder to make if you are uninterested.
2. What is the business plan like?
It is beneficial to see the goals of the current owner and evaluate which of these goals have actually been achieved. If there is no business plan, this should give you pause.
3. How does the business perform?
Check the business’s overall performance. Take a look to see if the business requires many hours of demanding work from the owner. If so, remember that this owner putting in all of those hours could be you in the near future. Make sure there is a reliable manager to oversee operations in your absence.
4. What are the demographics?
Take a look at the customers. Who are the key customers? Are there several main accounts that the business depends upon or a wide variety of customers and clients? If the business relies on just a few key accounts, this could be problematic if things were to change. Do you see a clear way to add new customers in the future? Before you buy a business, you will want to feel confident that you can help it thrive and grow.
5. Are you satisfied with the financials?
You will want to take a deep dive into the business’s financials once you have successfully signed the necessary written agreements. Make sure that everything has been provided, including tax returns, profit and loss statements, balance sheets and bank statements.
You will want to be careful when purchasing a business and watch for any red flags. The last thing you want is to make a hasty decision that you will regret later on. The team at EBIT Associates can help you through the steps to buying a business.