Maybe you’re looking to buy a business because you’ve always wanted to work for yourself, or to diversify or expand your current operation. Regardless of the reason, this is a big decision that will impact you personally, financially, and professionally.
Here are some questions you should answer before buying a business, as doing so will put you on the right path to making an informed decision:
- Why do you want to buy the business? Above all else, you must be clear on why you want to make the purchase. If you can’t clearly answer this question, it’s time to take a step back.
- What are the financial implications? Buying a business can be (and typically is) an expensive endeavor. You should know how much it will cost, which includes more than the asking price. It is essential to calculate all of the costs of purchase in order to properly value the business.
- Have you reviewed the company’s financial statements? Without this, you’re taking the company’s word in regard to its financial circumstances. Never do that. Before making a final decision, look carefully at the numbers. This financial analysis may prompt you to walk away or restructure the purchase.
- What does the company’s workforce look like? In most cases, a company’s workforce is its most valuable asset. Get a good feel for the value of these human assets before buying.
The more questions you answer when buying a business, the more confident you’ll be that you’re making a decision that will benefit you in a variety of ways.
Once you’re on board with the idea of making an offer, turn your attention to performing the due diligence that will minimize your risk.