When looking to buy a business, you may think that you have all of the bases covered – you’ve got the funding, the business is currently successful, and the seller is cooperating with all your professional questions and concerns. But there are many factors to consider when purchasing a business. Before you jump head first into the purchase of a business, consider the following points, and ensure that your business decision won’t come back to bite you later.
1. Understand What Assets You Are Purchasing
Knowing which assets you are gaining going into the sale is a vital factor, as these assets can affect taxes, and take away your liability in case the seller is being sued. You should never, ever, purchase stock in an existing company that you are buying. Rather, offer to purchase all assets of the business.
2. What is the Seller’s Intent After the Sale?
Before you finalize any business purchase, have a direct conversation with the seller, and get his take on his intended actions post-sale. Find out whether he plans to stay on board in the business somehow, or if he plans to completely drop-out of any responsibility or business on-goings in general. If the seller plans to stay onboard, develop a clear idea and description of their role and responsibilities so you both enter into the sale with clear expectations.
3. The Employees and Their Roles
If you are buying a business that has existing employees, ensure you know their plans and positions, as well. Chances are, there are a few select “key” employees that can let you know almost as much about the business as the seller themselves. Chat with the employees, get their take on the business and customer base, and have them communicate their intentions once you take ownership of the business.
4. Why is the Seller Selling?
Do some investigation as to why exactly a seller is getting out of the business. All sellers know their business inside and out, and a lot better than any outsider with perspective. No matter what the original stated reason as to why a seller is deciding to part with a business, cultivate a meaningful relationship with the seller for increased insight, and a general idea of what you could change once the smooth transition of ownership is complete.
5. What do Customers Say About the Business?
The customers are the heart of any business. Without them, there would be no revenue, growth, or business in general. There are certain questions to ask when buying a business, and chatting with customers will help you obtain many answers. Inquire as to what they love about the business and any suggestions they have surrounding potential changes. Learn the customer base, and target market, well before you decide to purchase a business.
As an entrepreneur, the adventure into buying an existing business can be fulfilling and freeing. By asking the right questions, you’ll be able to come to a well-rounded decision as to which business is right for you. Transworld Business Advisors of Minnesota provides professionals with incredible business opportunities and we have a detailed list of Minnesota businesses for sale.