When buying a business, ideally you will undertake a number of tasks to ensure due diligence is properly conducted. Consider the below as a starting point to assist you in assessing the options that will best suit your circumstances and requirements.
- Why are you buying the business? Conduct a self-assessment of yourself and others that you’re professionally associated with. What are your strengths, weaknesses, and passions? What motivates you most about owning a business? Completing this task enables you to identify on paper any obvious synergies or red flags that will save you time when investigating businesses and assist to define yourself as an entrepreneur. For example, if you’re an expert in social media, purchasing a business that relies on sales conversions via these platforms makes sense as you’ll be able to maintain and hopefully grow this client base.
- Is the seller trustworthy? You want to ensure that you are dealing with someone who is transparent, honest, and upfront about all aspects of the business. Start by researching reviews and testimonials from previous clients or business partners. Additionally, ask the seller for references of previous buyers who can share their experiences. To be completely thorough, you could also Hire Bond Rees for expert private investigation solutions such as conducting due diligence, which may include financial background checks, legal history, and business reputation assessments.
- What is your timeline? Contracts will contain a number of important dates. Look out for clauses that detail the specifics of any cooling off periods that are exercised should you wish to not go through with the purchase. Also keep an eye out for your settlement date, when you actually become the owner. Will there be a handover period where the previous owner will train you in their current procedures and accounts?
- Is the lease good? Remember to determine whether a transfer or renegotiation of the premises you wish to operate out is in order, or will be included as a part of your sale. If you are going to be without a space, then ensure that you have a replacement or a substitute handy, whether that be in the form of a structure quickly made from round metal building kits or a corner unit in an already existing commercial building. Having a ready work area is important so that there isn’t a halt in business processes during the transition of ownership.
- How will you pay? A common way to structure the purchase of a business is to pay in installments. You may even wish to have a portion of the sale price held in trust and released after certain contractual milestones have been met.
- Are the books looking good? Purchasing debt is not always unhealthy, but knowing the difference between the good and bad will potentially help you avoid a dud operation that requires substantial investment to be redeemed. Also, be aware of any business loans or other costs that you may be required to pay when taking over. Also reviewing financial records, such as revenue, is vital!
- What are some roadblocks? Whether it be a complex risk assessment or competitor analysis, a sound method for identifying the potential of a business for sale is a crucial step. Knowing where you can improve will help you get off to a successful start when you take over ownership and give you a frank picture of what to expect if things don’t go according to your initial business strategy.
