Before You Buy A Business
The decision to buy a business is a big one, especially if you are becoming an entrepreneur for the first time. The good news is that when you purchase an existing business or a franchise, you will have the opportunity to become your own boss without having to start the company from scratch. A great deal of people consider buying a business of their own each year. That being stated, you need to be smart about it if you are actually going to pull the trigger on a purchase. For many first-time business owners, it can be tempting to jump on a deal that may appear too good to be true.
However, with most things in life that appears too good to be true, there is an extremely high probability that it is actually the truth. That is exactly why you need to slow down, have a bit of patience, and do your research. There is absolutely no need to rush the process. Furthermore, if you feel pressured by the seller to make a quick decision or close the deal immediately than you should not simply walkway. You should run. The following information will provide you with further advice on buying a business.
Perform Your Due Diligence
Due diligence is the process of gathering as much information as possible prior to purchasing a business. It is an incredibly important step in your journey to becoming an entrepreneur. The due diligence process ensures that the business is actually a good opportunity for the buyer. For example, is the business making money or losing money? Even if the business is currently losing money it may still be a good opportunity, however, it should absolutely reflect that in the selling price.
Hire A Team
During the due diligence phase, you should be working with a team of professionals in order to ensure that you have uncovered is all of the information needed to protect your interests. In the minimum, this team should include an accountant, a business lawyer, and a business broker. Entrepreneurs that fail to hire a team may very well end up overpaying for the business. Worst yet, they could be getting themselves into a difficult situation from a financial and or legal standpoint.
Hiring a team to protect your interests should always be considered a cost of doing business that is worth its weight in gold. It is also worth noting that most sellers will require you to sign a confidentiality agreement, also referred to as a non-disclosure agreement, before starting the due diligence process. The document prevents you from discussing any confidential and potentially damaging information that your team has uncovered about the business with other parties. In essence, it protects the seller in case you do not end up buying the business after reviewing all of the information.
In conclusion, buying an existing business or a franchise is an extremely exciting prospect. You get to be your own boss and control your own fate. However, it is incredibly important to take the proper steps before making the purchase. The due diligence stage may very well make the difference between buying a great business or a sinking ship. The more you know the better off you will be.
In a world of opportunity, it pays to have a good guide. If you would like to speak with a professional franchise consultant and business broker, On Pace Franchise & Business Advisors is here for you.