Someone approaches you and tells you that they are selling their business – are you interested in buying? Your head starts going in a million directions – you start considering all of the ways you could turn the business around, ways you can cut costs,update the businesses image, increase profits and how new and exciting this venture can all be.
Taking the plunge into business ownership is an exciting time – however before you start thinking about all of the things you can do you need to start asking the seller a bunch of questions and gathering information about the business.
What Are you Buying?
This seems like a simple question with an easy answer – I am buying a coffee shop, a law practice, a nail salon etc. However, the answer to this question is not that simple. What are the assets of the company and what are its liabilities? How old is its equipment? What are the businesses expenses? Are there ongoing contracts with vendors that you will assume? Does the business rent or own the property it uses for its business? What will happen with the company’s employees when the business sells? Are any employees critical to the business running smoothly? Will the current business owner stay on for a period of time to on board you? What do the profit and loss statements look like? How much time does the current owner spend actively running and managing the business? Are there multiple owners? It is critical that you do your research and due diligence on the company and understand exactly what is for sale and what is not.
