Top 5 Mistakes when Buying a Small Business

Top 5 Mistakes when Buying a Small Business

Considering whether to buy a business or not? There are many things to consider when buying a business. Understanding the most common mistakes to avoid when buying a small business will help ensure that your own business will not flop.

Paying Too Much

You may spend too much on buying a business if you do not thoroughly investigate the business, its customers, its suppliers, its competition, and its industry before you buy. It is also important to understand why the business is being sold

Buying the Wrong Type of Business

In the urge to own a new business, some people buy a business that does not fit their particular set of skills. Is this business for you? What type of business is it? Does it interest you? Do you have the appropriate experience and education to make it grow? Don't buy a flower shop when your experience is in electrical.

Not Using Experts

Consult with experts during the process of buying a business. At a bare minimum, you should enlist the aid of an attorney and a CPA. The attorney can prepare and review documents, help structure the deal and make you aware of legal and liability issues. The CPA can provide a financial analysis of the business and advise you on tax and accounting matters. You should also consider adding a professional business broker to your team. They can help with negotiating a price, and provide valuable information about the business industry, competition, and economic conditions.

Due Diligence

You should verify all the information about the business before buying, and recognize the importance of Due Diligence in the transaction. Due diligence is the time when you ascertain the financial health of the business. You can do some of the investigating yourself to save money, but do not cut too many corners it may cost you in the long run.

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