If you’re considering buying a business, proceed with caution. It may be the opportunity of a lifetime, or maybe lead you to financial disaster.
Here’s 4 things you should know before buying a business:
1. Why is the current owner selling? Is the owner retiring or selling for personal reasons? Perhaps the business is thriving and has a strong customer base. Yet, perhaps the business is relying upon a technology that’s on its way out. Remember the rise and fall of movie video stores? There may be a variety of factors why the owner has decided to unload his business. Get the facts.
2. What do I know about this industry? If you’re buying a restaurant, you better know something about the industry or the specialty niche it serves. There may be barriers to entry that will hinder competition. Or, there may be barriers to exit that will keep competitors in the industry even if they are not profitable. Do you know how to operate a business such as this and make it profitable?
3. Why should anyone buy from them instead a competitor? Do they have superior products or services? This answer should be easy. If you don’t see any reason why this business stands out over its competitors, then perhaps you have a plan in mind. The business may have untapped potential that the current owner never pursued. This could be your golden opportunity.
4. Do I have a plan to improve the business? Do you think you can run the business better than the current owner? You should have a business plan or some sort of strategy in mind as to how you would grow the business, increase sales and profitability. Again, this business may have untapped potential. This is where your creativity and good business sense comes into play. This is also an opportunity to consider whether or not this business is really right for you.
Buying a business can be a very rewarding opportunity. But it pays to plan ahead and do your homework. For more information on buying a business, download BizBuySell’s free Guide to Buying a Small Business.
“Purchasing an existing venture can be very rewarding, or it can be a nightmare.”