If you’re considering buying a business, this is no doubt an exciting time for you and your future. But, buying a business is complex and there are a lot of things that you need to look out for throughout the process. It’s important that you do everything you can to make sure that you make the best investment possible. In this blog we’ll be talking about some of the most common mistakes people make when buying a business. Let’s begin.
1. Failing to perform proper due diligence
When you find a business that you’re interested in buying, it’s essential that you conduct extensive and thorough due diligence before making any decisions. Let us repeat: due diligence is your friend! Even though it might seem tedious, you will thank yourself in the end because often things are not as they might seem. From showing you a false financial statement to lying about the cost it takes to run the business, sellers have tons of ways of duping you into making a bad purchase. By taking charge of the process you eliminate this risk.
2. Signing in your own name
When it comes time to sign for the purchase, make sure you don’t do it in your own name. This is because signing in your own name puts your personal assets at risk to the liabilities of running a business. Make sure you have set up an LLC or other professional business entity before it’s time to sign on the dotted line. It’s such an easy mistake to make, but it’s one you definitely want to avoid.
3. Buying above budget
This one might seem obvious, but it’s worth mentioning because it happens all the time. Buying a business should be like buying a house, never get in over your head because the costs are not going to go away, but rather go up before you’re likely to see any return in profit. Avoid this by sticking to your budget and making sure you don’t get sold on the idea of potential profit over actual profit.
4. Making drastic changes
Another common mistake entrepreneurs make when they buy a new business is making drastic internal changes once they take charge. Think letting go of support staff or consolidating departments. Although some of these changes are inevitable, a change in ownership is already a massive stress for a company, so take your time and avoid making any rash decisions that you’ll regret later on.
5. Failing to promote it
Another point that might be obvious but is nonetheless important to mention is promotion. Sometimes it’s easy to think that just because a business is already established and successful that it doesn’t need any additional promotion. For many reasons, this is simply not true. When you buy a business, you need to be prepared to take on and push for all necessary promotion expenses and marketing campaigns to keep your new business going.
Contact Trembly Law Firm.
Buying a business is a massive undertaking. Not only have you likely taken out a loan and extended your credit while also using up all of your cash reserves, but now you actually have to run it. At Trembly Law Firm, we know what it takes to run a business and want to help make sure yours is a success. If you have any questions about buying or selling a business, contact us today at (305) 431-5678!
