A lot of people dream about owning their own business, so you can hardly be blamed for getting excited about an opportunity to take over an existing business that you admire.
Before you buy, however, there are questions that you need to consider first:
1. Is the current owner being transparent?
There are two questions that you should ask the current owner almost as soon as you start talking seriously about buying the business:
- Why are you selling?
- Can I see your financials for the last few years?
People sell their businesses for all different kinds of reasons. Maybe the business is perfectly healthy, but the owners want to retire. Maybe they’ve lost their focus and the business is struggling. Either way, the answer can inform your purchase strategy.
Looking at the financials for the last three years or so is an essential task. If the owner won’t disclose, you can’t make an educated decision about the purchase.
2. Who will be involved in this transaction?
Who has the final say when it comes to selling the business? Are you negotiating with the right person? This can particularly be a problem if you’re buying a family-owned business because there may be some complex dynamics among the owners.
You also want to find out who else knows the business is for sale. Ideally, you should try to control the news of the sale so that you mitigate any potential fallout.
Finally, find out if the current owner or long-term employees are willing to stay in place for awhile to make a seamless transition to new ownership.
Buying a business is one of the most complicated purchases you may ever make. Take the time to talk to a business attorney about your plans before you make any firm commitments.
