Top mistakes people make when buying a business

                                                                                         

There was a time in the remote past when people used to build their business from scratch. These days, there is an easier path to becoming a business entrepreneur: simply buy a business concern from someone who has already done much of the hard work in establishing the business. If you have some thoughts of buying a business, it pays to be aware of the top mistakes people commonly make while buying a business .

Buying the wrong fit: Before you buy a business, consider this: it is as much a livelihood and a lifestyle as a means of making money. You aren’t just buying an inventory or a lease. If you want a decent return on your investment, buy something you like. At the same time, do not make decisions on the spur of a moment. Just because a business is good and is making money, it’s no reason for YOU to buy it. Evaluate how the business will run itself.

Buying without proper due diligence: Do your homework well. Even if the books are showing a profit, the business could still be hit by a fair share of problems. Find out why the business is being sold. For instance, a business owner may sell his profit-yielding store simply because he knows that a popular superstore has purchased the property just on the other side of the street! Find out whether the business is borrowed or leased. Check out how many bills are unpaid so you do not get saddled with a pile of outstanding commitments. If the deal looks too good to be true, if you feel insecure about anything or if you doubt the intentions of the seller, drop the deal immediately. Many experienced business owners say that they often go through various deals before they identify the right one.

Buying without proper preparedness: In these days of tough economic problems, you should never think of buying a business on full cash. Generally, banks are unwilling to finance the sale. So, the only way is seller financing. It’s a good sign if the seller is willing to finance the sale with a low down payment. This indicates the owner’s faith in their business.

Buying without a proper contract in place: If you believe that price is the only aspect you have to consider while buying a business, think again! The soul of your new business lies in the business contract you draw up with its owner. A bad contract can really block your path to success. Make sure that the contract is fair with respect to several aspects like debt repayment, loans and other schemes. It is quite natural if you find some of the terms difficult to understand. In that case, hire a solicitor or an accountant or both.

Seller intention: When buying a business, it is important to be sure of the seller’s intentions. Is he really interested in selling, or merely testing the waters? One sure way to find out is to value the deal quickly, put together a written offer and see whether the seller is willing to negotiate. If you are not dealing with a qualified seller, you are wasting your time!

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