Are you looking to acquire a new business? If statistics are anything to go by, there has been upsurge in the number of people selling businesses in the last couple of years. In fact, 2018 recorded the highest number of businesses sold in the last five years, with 10, 312 entities reportedly purchased. If you’re about to buy a business however, here are six questions you must first ask yourself.
1. Am I cut out to be a business owner?
Only you can answer this question by looking at your personality, assessing your temperament, risk tolerance, and career goals. Why do you want to buy this business? What are your underlying objectives? Be honest and truthful in this regard. If you simply want a business but are not prepared to run it, being honest enough to admit this will help you with the next set of questions.
2. Do I want to be a sole proprietor?
Being a sole proprietor means that you own the business outright. You bear all the risk and responsibility. Other business models that you can consider include partnering up with another person or others in a joint venture. Other possible structures include limited liability and corporation. The answer to this question may also be determined by the business you wish to buy.
3. Do I have the necessary experience to successfully operate the business?
Enthusiasm is good and so is belief in yourself and your abilities. However, businesses don’t run on talent and charisma. They require skill, knowledge and experience. When buying a business it is preferable to buy one in which you’ve had some sort of previous working experience. This is particularly true if you wish to acquire businesses that tend to be more technical and may in fact need certain licenses and qualifications like spas, medical centers and pharmacies.
4. What are the future prospects of this business?
Before you go ahead and purchase the business you’ve got your heart set on, it’s key to ask why the current owner is selling. Have you looked at the financials? Is everything in order? Is there a future for this business or there are hidden problems the owner isn’t being forthright about? How about the competition? You want to acquire a business that actually has a future, not one that’s already run into the ground. Remember, if it sounds too good to be true, and you smell a rat it’s probably a sign that you should stay away.
5. Am I in a position to buy the business at the proposed price?
When purchasing a business there are a lot of hidden costs that might not appear immediately. However, when you start processing paperwork and going through the legal channels, the costs can add up pretty fast. Financing options are indeed available and if you need to consult with an expert team consider Sun Acquisitions. Such teams can help you secure financing and complete the transaction. It’s imperative to get good advice before going ahead with such a purchase.
6. Do I want to acquire the entire business?
This aspect of business acquisitions is one that few are aware of. You don’t necessarily have to buy an entire business outright. You can select aspects of a business which are for sale and opt to purchase those instead. For example, you might not be interested in taking over the debts or liabilities of a particular company. Perhaps all you want is the equipment, real estate or contracts.
Taking time to answer these questions honestly will give you a good idea of where you stand in terms of purchasing any business.
Get in touch with one of our friendly members of staff to learn more about how Sun Acquisitions can help during business mergers and acquisitions.
Disclaimer: Any information provided in this blog is not intended to replace legal, financial or taxation advice given by qualified professionals.