Thinking About Buying a Business? Read This First

For many professionals, the idea of buying an existing business is appealing. Whether you’re looking for something with an established customer base to move forward with or for a struggling business that could use reform and a new direction, the options are endless. In many cases, purchasing an existing business more appealing than starting from nothing. However, there are many things to consider before taking this step.

Understanding Types of Existing Businesses

Just because a business is for sale, or seems like a “good deal,” doesn’t mean it’s the “right” deal for you. Before starting out on your new endeavor, it’s important to consider your work history and knowledge.

What industry are you experienced in? What are your strengths? Asking these questions ensures that the business you look into purchasing meets your needs and strengths. If you purchase a business for the wrong reasons, or without the proper knowledge base, you could end up struggling or even falling flat during the initial learning phase.

Moving Forward

Once you know which business type you’re interested in purchasing or buying into, it’s time to get started.

Start by looking close to home. Get to know businesses and their associates in your area. Attend networking events, make it known that you’re interested in investing in a new endeavor. You may be surprised by the information you find out. This is important because many businesses are sold before even being listed as for sale. Being proactive is critical.

If you’re struggling in this area, getting to know a business broker who can look for deals on your behalf may be beneficial.

The Need for Research

Once you’ve found a potential business opportunity, research is critical. At this point, it may be a good idea to work with an experienced business law attorney and financial expert to be sure your investment is right for you.

• Business records and documents that should be examined include:
• Financial Records (certified): cash flow statements, accounts payable/receivable, balance sheets,
• Employee files and benefit information,
• Employee contracts,
• Leases,
• Legal records – look for past lawsuits and other information that could be important moving forward.

It’s important to understand why the current business owner is looking to sell. Is it to get out of a negative situation? Or, is it just to move on to something new? There is a serious difference between the two. If there are any red flags or questions that come up without answers, it may be best to move on.

Finalizing the Details

Once you’ve found the business that’s right for your vision of the future and have done the proper research, you can close on the deal. This step should include consulting a business law attorney to ensure your protection during the proceedings, working with an appraiser to negotiate a fair purchase price and creating terms that you and the seller agree upon for a final written sales agreement.

Purchasing a business can be an exciting, life-changing endeavor. It can also lead to unforeseen complications when the right steps aren’t put in place from the beginning. Protect yourself and your investment by working with an experienced business law attorney like Michael Hynum with Hynum Law. We look forward to working with you; call to set up a consultation today.