You can launch a business with a great idea — or you can see someone else’s great idea and think, “I could do that even better.” If that’s the case, you may be thinking about buying another entrepreneur’s existing business and turning it into your own.
Tread carefully. While there are plenty of reasons for a company’s owner to sell, you need to approach the acquisition of any business very carefully to avoid getting a bad deal. Here are some tips you can use:
1. Do some digging into the owner’s story.
Maybe the seller really is retiring — and maybe that retirement is being helped along by the fact that the area’s major employer has moved out and there’s a general shift in the area market that is impacting profits. Talk to other business owners in the area about their perceived challenges — and listen carefully for information that can reveal major problems that you might not otherwise recognize.
2. Look carefully at the company’s financials.
Once negotiations get serious, take your time and pour over the company’s books so that you have a clear understanding of everything that’s going on in the business. Keep in mind that this is not a task you should be doing on your own. An accountant or other professional should be involved in this process so that you’re sure the financial data reflects the seller’s statements about the health of the business.
3. Make sure that you understand what you’re getting.
When you buy a business, you have to be careful what comes along with that purchase. Make sure that you understand the extent of any tax debts, liens or other negatives that you’re taking on. You also want to make certain that you’re getting everything you expect — down to the company’s intellectual rights and name.
If you’re thinking about buying a business, find out how an experienced attorney can help you avoid mistakes and protect your interests.