Buying a business is a tedious process. It is important to plan in advance and implement each step sequence wise. Here are some Do's and Don'ts which you should take care of when buying a business:
1.Don't invest in a business which is not appropriate for you
Obviously you get the minutest detail of a business from the owners when you purchase it. You fail to understand the basics of any business that is suppose you are interested in buying a business which relates to the pesticides; undoubtedly you don't know how to run this business and how to gain profits. The previous owner will exclaim it to be an easy business but it is not so. So always choose the business which you have the basic knowledge about.
2.Before buying a business set up a price which you think you can afford
Always set a base price in your mind and also communicate the same thing to the broker if you have hired one, setting the price always help in negotiating the deal. Owners tend to demand high payment but don't get so much involved in buying the business by forgetting your base price and buying the property on a higher rate as demanded by the owner.
3.If you buy the shares of a business, remember you are acquiring everything
You may be buying the shares of a business and will be thinking that default liabilities will not harm you, and then you are wrong. Every law even in any country states that when you buy the shares of a specific country then you acquire the tax liabilities, lawsuits and debts etc. So in this matter it is necessary to check each and every component of the business you are acquiring shares of.
4.The transferring of knowledge depends upon the type of business
If a business is seasonal, then you should ask for one full year of how to manage and operate the business. Make sure to have an agreement on the transfer of knowledge from the seller to the buyer.
5.If you are acquiring a service business, remember you are buying a business whose assets are primarily people
Buying a service business is a risky medium. Before buying such a type of business always study the market trends of what sort of people you will be employing. Keep a check on the recruitment agencies nearby the business and also check the local newspapers for other potential people.
6.Warranty issues in any business is a major liability
It is better to resolve the cost of warranty issues before buying the business. If you purchase the shares then you are buying warranty liability costs and issues of warranty claims etc. Also do not accept any agreement which states that warranty costs are lower for the seller, it may be high for you. Keep it clear with the seller on this issue and ask him to include the labor costs, material costs and terms of payments etc in the agreement in advance.