Wednesday, August 6, 2008

Important Questions to Ask Before Buying a Business

(Note from Tara: This guest post is from Bizymoms.com who support and encourage work-at-home moms and women business owners with a wealth of resources, tips and free e-courses. They graciously agreed to write on this topic for you, my Dusty Widget readers, and to let me add my own two cents into it. Thank you Nina and Susan!)

Buying a business can be one the greatest decisions of your life. Unless you plan it well, however, your acquisition may not yield the income and lifestyle you’re hoping for. To help guide you through your decision-making, here are some important questions to ask before buying a business or becoming a partner in one.

What business is right for me?

Before you start looking at businesses, you have to evaluate yourself. Take stock of what you know, who you are and what’s driving you to be a business owner—is it money? Control? Independence? Honestly identify your weaknesses, recognize the tasks you don’t enjoy, and determine ways in which you can deal with them. Consider the industry you know best, and look for business opportunities that will benefit from your strengths and not be affected by your weaknesses. Take the time to establish expectations that are achievable and realistic.

What types of businesses are available?

Avoid speeding into the business-buying process. Take time to think about the different types of businesses that exist and what kind would be most appropriately suited to your goals, personality, strengths and lifestyle. Review the financial requirements of business ownership with a qualified professional resource. Counselors at organizations such as SCORE (Service Corps of Retired Executives) can help you find the type of business that’s right for you.

Okay, now that you’re looking…

Does this business fit my goals?

You’ve considered why you want to buy a business and what you’re hoping to accomplish as a business owner, so be honest as you look at the business opportunity and consider its potential to meet those objectives. If your hope in being a business owner is to have more flexibility in your schedule, then running a retail store may not be the best choice. Your goals should drive the decision-making and help you determine the type, size and even location of the business.

Why is this business up for sale?

Perhaps the owner has to move, accommodate a health issue or is ready to retire. But maybe the business owner sees a market trend or neighborhood shift on the horizon that threatens the business. Have sales been decreasing? Have customers been lured away to a competing business? Do your research! If you buy the business, you buy its problems as well as its potential.

What technical knowledge is required for this business?

Do you posses this knowledge to manage the business? Are you familiar with the systems needed to run this business operation? Is the seller willing to dedicate the time to train you, if required? Is it worth the time to be spent on training? Will it take a long time for you to get familiar with the trade? Will this turn-around time be worth the wait? Every new business owner has a learning curve—take time to figure out how much expertise is needed to succeed with this business.

What is this business’s cash flow?

Verify with your accountant all financial information provided by the seller. Have your accountant determine whether the cash flow of the business is sufficient to make payments on your new debt, cover your living expenses and provide a reasonable return on your investment. Find out how much operating capital you’ll have to invest after the purchase.

What will happen to the business’s relationships as a result of the change of ownership?

Will clients stay loyal to the business if you take over? How about vendors? What suppliers have special accounts or terms? Will they keep those terms or require renegotiation? Are customers drawn to the business because of the owner’s personality or presence? Do you see a new market for this business?

How will I handle the business’s employees?

As you are aware, employees are the building blocks of a business. Would the existing employees be continuing their service? If so, would you be able to establish and win the trust of the existing employees?

What legal considerations are involved with this transaction?

Will the seller agree not to compete within the same location for a considerable period of time? Are there any court cases pending against this business? If yes, are they favorable or potentially harmful to the business?

Be wise, ask questions, and think twice before buying a business. The opportunities you consider could get you ahead or leave you farther behind than when you started—the difference is in how much you know!

Summary: This article outlines important questions you should ask yourself before buying a business.

Bizymoms.com has been helping moms work from home for over 10 years. Visit today to enjoy free resources including live chats, interactive message boards, informative articles, and of course, the best home based business ideas on the Internet! Bizymoms also offers complete home business packages that get your business started right away!

Contributions to this article were provided by Tara M. Bloom, author of "Ditch the Dusty Widget," a blog that contains big advice for the little guy—tips, resources and tales to help you start, run, market and grow your small business.

©2008 Bizymoms.com. All rights reserved.

3 comments:

Thaddeus Gunn said...

OK - I'm not really here for business purposes.

I'm wandering around checking out the blogs of other other copywriters like myself. I wanted to find out what copywriters write when they're not writing copy.

For the sake of introduction, here's my professional life in a nutshell: 20 years in copywriting; currently Senior Copywriter for MRM Worldwide (McCann-Erickson), Seattle. Private life: I write. I hike. I blog: www.deargregory.com.

I see you like food. You should make my mac and cheese. It works.

http://deargregory.blogspot.com/2005/08/best-damn-mac-and-cheese-in-entire.html

Atasha said...

Great article! People are sometimes confused whether to start a new business of their own or buy an existing business. There are pros and cons to each option and I find this Don't Start It, Buy It! - When buying beats starting from scratch article informative as well. Here is a list of Oregon businesses for sale women entrepreneurs may find useful in their search for acquiring that dream business of their own.

ryan said...

The article of this blog very informative and useful also.It resolves many problems of mine.I loved it.thanks for this marvelous article...................

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