Have you been considering acquiring a business? Becoming an entrepreneur? An entrepreneur is defined as someone who operates a business. The nature of acquiring that business, however, does not matter. That’s right – an entrepreneur is either someone who has invested in or purchased an existing business, or has started one from the ground up. The key is simply owning and/or running the business.
For entrepreneurs looking to buy a business, here are a few questions you should ask the current owner:
1. How do you document the business financials?
The first question is so important because organized financials are the first step to listing a business for sale. Not to mention, also a vital step at the tail-end of the selling process. When it is time to perform due diligence, the more organized and detailed the financials, the more quickly you may be able to close the deal.
2. Do you have any past, present or potential future lawsuits?
Lawsuits, similarly, are something you will inherit upon transition of ownership. Therefore, it is important to know of any past or future legal issues and/or fees you might come across. To protect yourself, as the new owner, you need to get exemption from future litigations in writing from the previous owner.
3. How much does the business profits depend on loyal clientele?
In the case of a loyal clientele – it can get a little tricky. Obviously, it is ideal to purchase a business with goodwill and client loyalty, but how far does that loyalty go? Are you at risk of losing these loyal clients once they learn that the business has sold? This is information you need to consider before going through with the purchase.
4. Will the current employees stay on?
When it comes to considering loyalty issues, the employees pose additional concerns. A well trained and knowledgeable staff is often an important selling point for buying a new business. If the team are likely to leave if there is new ownership, it is important to know that in advance. Especially if you are not wanting to replace and train an entire new team once you take ownership.
5. What skills or qualities are needed to run this business successfully?
There are a number of reasons why a business owner would want to sell a successful business. No matter what their reasoning is, they likely hope the business will remain successful upon their departure. That is why is important to gain insight from the previous owner to learn what makes the business so successful and how to keep the team and customers happy during the new transition.
Considering buying a new business? Let us help!
For all other matters around the search and acquisition of a new business, contact your local Transworld Business Advisors in San Diego today.