Should You Buy A Business? Consider These 3 Factors First

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Image of young businessman leaning against wall with tablet - should he buy a business?

Owning a business has many pros and cons. On the plus side, it’s an opportunity to be your own boss, control your destiny and, potentially, increase your net worth.

On the other hand, buying a business will change your life forever. It can be a 24/7 job that could interfere with your personal time and family life.

Make sure you consider the financial risk before making this life-changing decision. Why?

According to INC Magazine, as many as 96 out of 100 businesses fail each year due to cash flow problems.

 

Finding the right business

If you want to buy a business, your first step should be contacting members of your professional advisory team – your CPA, lawyer, financial advisor, business broker, or investment banker.

It’s possible that they already have a lead on a business that’s available.

If not, they’ll work with you to help identify a business to suit your needs.

 

Identify the ideal company you’d like to purchase.

What size company are you looking for? Are you interested in a manufacturing company?

A service provider? A small company you can grow?

Do you want a company in a mature market or one that offers a new technology?

 

Ask yourself what you bring to the equation that’ll improve the potential profits.

Do you have expertise in lean manufacturing that’ll improve operations? Do you have relationships that can increase sales?

Do you see opportunities to reduce expenses and improve profitability?

 

Consider the variables that can undermine your purchase.

What kind of culture does the company have? Will you enjoy being part of it?

Is the management competent? Is the workforce capable? Are the customers loyal?

How will your purchase impact the future of the business?

 

Take time to think about each of these questions and any others that your professional advisory team ask. Again, the decision to buy a business is life-changing.

If you’re prepared and know what you want out of the deal, you could set up a positive business-owning experience for yourself.

 

Have questions about buying a business? Let’s talk!


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Cover image of Mergers & Acquisitions: A Guide to Selling or Buying a Business guide

You’ll want to read our guide if you’re buying a business or selling one. We guide you through raising capital, picking a professional team, understanding your company’s value, and so much more. Don’t miss out. Download it today!