Tips on Buying a Business

Here are a few additional tips on buying a business that can serve as a reminder when you enter into the process of buying a business.

• Do not buy a business you are not passionate about—no matter how good the deal looks. You will live to regret it.
• Do not be in a hurry. Search out several businesses for sale and start with the one that makes your pulse quicken with excitement…one you can be passionate about.
• In all probability you will be working through a small business broker. This is O.K. as long as you realize they are sales people and the seller will be paying an additional 5% to 10% of the purchase price for their fee. Sellers usually add this amount to their asking price for the business.
• Know where your money is coming from before you start negotiating. This way you will know how much you have to work with.
• If there is a physical location involved, be sure to visit the facility for a careful visual analysis of the facility. This is a very important step when trying to determine a sales price.
• Be sure to solicit help analyzing the purchase opportunity, especially if this is your first purchase. You will need accounting, legal, and financial help at the least. Working with an advisory group is even better.
• Meet with a few employees as negotiations progress and the seller has discussed your impending purchase with their employees. If the seller wants to wait until after the Agreement in Principle is signed, then make satisfactory meetings with key employees one of the contingencies to closing.
• Due Diligence. I cannot emphasize enough, the importance of a thorough due diligence examination of all the records of the business as well as the physical attributes (inventory, equipment, facilities, etc.). I strongly encourage you to have an accountant assist you in reviewing the financial records.
• Plan on having enough money to pay transition costs. These costs include doing the things you want to do to launch your newly purchased business up to the next level…your level.