Buying a Small Business
August 08, 2023
DD Planet
Buying a small business has its own pros and cons. On the positive side, we may get a customer base, on the negative side, we may overlook certain associated risks.
Here are the tips and advice to help you know the checks you need to do before you buy a small business:
- You must understand why the business is for sale. You may ask the seller but need not fully rely on the reason stated. Better would be to assess the market situation of the business yourself and know the reasons from your own sources. Talk to neighbours and some friends who know about the field and area.
- If you’re buying a running shop, you must assess its location and understand the competition in its vicinity.
- Do not buy a business just for the sake of it. Enter only if you have interest in it and its product or service suits you.
- Understand the basic balance sheet, profits, revenue and the existing client base of the business thoroughly.
- Learn about the running and operation costs, tax implications and other overheads associated with the business and purchasing the business, both.
- Assess growth prospects. It has to tally with your long-term goals. Moreover, the existing success of the business may not necessarily be viable in future due to external factors or government policies. Therefore, assess everything.
- Assess whether you’ll benefit from the purchase or are better off building the business yourself from scratch.
- Determine the market value of the business.
- Assess the funds involved, how will you be organising the money to purchase the business.
- Negotiate the best price. Do not settle for less.
- Perform complete due-diligence and check all the documents with the help of professionals (Law/ Accounts).
- Spend time on getting prepared a sales agreement that benefits you as well as is legally right.
