Things To Look for When Buying a Business
The fastest way to launch a new business is to buy an existing one. You can bypass the grueling and stressful initial phase to set up the business. But it’s critical that you carry out due diligence when buying an established business or you may not be able to move straight into profitability as you hoped to. A reliable business law attorney in Alabama can help you evaluate several factors in order to identify a business that is a good fit for you.
Original Owner’s Reasons for Selling the Business
The most important factor to consider is the owner’s take on selling the company or business. Are they retiring? Is it due to health reasons? Is the owner considering a different venture? There are several reasons for a business owner to sell their business. You need to be wary of situations where the owner is selling a business because of imminent downfall.
Carefully examine the reasons provided by the owner. Look for potential warning signs and red flags. This is where due diligence comes in helpful. A business law attorney will be able to uncover information on the enterprise. You may want to get the owner to sweeten the deal or look at other available choices if the business is being sold to cut losses.
Cost-Effectiveness of the Deal
The business should be worth the price that the owner is asking from you. You need to ensure that buying the business makes sense. You should not be paying more than a reasonable rate.
While there is always room for negotiation, the starting price should be close to the worth of the business. If the owner asks for a rate that seems unfair or doesn’t make financial sense, it’s best that you move on to other choices.
You should also make sure that you don’t stretch yourself too much financially in purchasing the business. You should not go in over your head. In an ideal situation, you would have the available capital to purchase the venture without having to finance the entire thing.
Skills to Operate the Business
A business that is profitable under existing management may not necessarily remain the same under new leadership. You need to possess the necessary skills for keeping a business profitable. Honestly assess your skillset to ensure you have what it takes to run the particular business. If not, you should hire someone you can trust to take care of the everyday operations.
Future Outlook of the Industry and Business
Timing is among the most important factors to be noted when purchasing a business. You need to make sure the time is ripe for entering a particular industry or buying the business. You can determine this by studying the trajectory of the overall industry and economy and comparing it with the trajectory of the business. You may also want to retain the services of a qualified business law attorney with past experience in handling successful deals of a similar nature.
Brand Reputation and Goodwill of the Business
The business you want to purchase should have an excellent reputation in the community it operates in. Go through customer reviews and testimonials carefully. You will come across common themes after going through the first few reviews and feedback. You should have a clear idea of what customers think of the business and what they want from it.
Look for recurring complaints regarding operations, customer service, or after-sale support. You need to find things that are a cause for concern. In addition, look for any complaints that may have been filed with the Better Business Bureau. It’s prudent to find a company with a loyal customer base and significant goodwill among the community.
Potential Legal Liabilities
You need to perform complete due diligence before you make a large investment. The most prominent thing to look for is whether the business has any legal liabilities. Are there any pending lawsuits, liens, or judgments against any of the owners?
Financial Records and Accounts
Digging into financial records is another prominent area of due diligence. The records should be organized and make it easy to find information. They should be straightforward. Ask your accountant to review the financial records thoroughly.
If you think the records are messy or not presented in the proper way, this could be a potential red flag. You should move forward only after you have diligently gone through everything to make sure things are in order.
Talk to a Knowledgeable Business Law Attorney – Book Your Consultation Today
At the BHM Law Group, our seasoned attorneys believe that purchasing an existing business makes sense only if the circumstances are right. Our attorneys can carry out the due diligence process to ensure you make a great investment.
To request your free consultation, call us at (205) 964-9764 or complete this online form.