Buying a business is ordinarily less risky than starting a new business — if you make the correct choice. Finding the right company, securing the funding to buy a business and timing your purchase all play a role in turning the idea of buying a business into a reality. Although knowing when not to acquire a business (you don’t like change, you don’t have enough free time or you don’t have the necessary capital) is pretty straightforward, knowing when to buy a business can be more complicated and uncertain. The answers to the following questions will help you decide when, or when not, to buy a business.
Is the Business Credible?
Once you’ve identified a business you’d like to buy, do your research. Review balance sheets and cash flow statements. Analyze accounts payable and receivable. Evaluate employee and union benefits as well as supplier contracts and lease agreements. Pay particular attention to any lawsuits or legal issues involving the business. Look into special licenses that may be required, including environmental permits, and check for previous owners. Don’t overlook asking why the business is for sale; the answer may give you a clue as to what’s in store.
What Does the Future Hold?
When buying a business, you need to think ahead. A business may be doing well currently, but if it’s in a dying or ever-changing industry, its future stability may be in question. A careful analysis of business trends and projections will alert you to potential risks and opportunities you might face in the upcoming months. Predicting the future is uncertain, but buying a business based on an accurate market analysis can be a well-calculated risk.
Is the Asking Price Reasonable?
Buying an overpriced business can have serious consequences and negatively affect your profit. Get a detailed list of what the sale includes. Research what a similar business in your location and chosen industry typically costs. Links Financial can provide trustworthy advice as to what you can expect from a pricing standpoint; this information will give you a realistic starting point when negotiating the final purchase price.
Is Funding Available?
Finding the funding to buy a business is an essential part of determining when to buy a business. Your cash reserves, current debts and liabilities and whether the economy is up or down all affect your ability to find financing for a business purchase. Links Financial has long-standing relationships with a network of financial resources, including seller financing, bank loans and Small Business Administration funding, and can help you find the type of funding to buy a business that fits your business situation and the economy.
Related topic: Financing A Business Purchase Without An SBA Loan
Buying a business is exciting and can open up a host of opportunities, including a path to greater personal wealth. Knowing when to buy a business is the first step in making an entrepreneurial dream come true. If the answers to these questions are favorable, there’s a good chance you’ll have a positive outcome. Give us a call today and let Links Financial partner with you to ensure a successful venture.
