When it is time to go out and buy a business, it can become difficult to understand what should happen first. There are several decisions to make in a hurry and it is difficult to pinpoint which decisions are best for your situation.
This is why it's important to understand the balance between communication, legal details, and the business itself.
Everything has to be in harmony and that is why errors are made. Here are the five most common mistakes that are made while buying a business.
Looking to get involved with purchasing or selling a business? Get in touch with the team at Network Infinity today.
Lack of Research
It is one thing to look for a business for sale and another to go through the nitty-gritty details. You want to look at everything and not just what is being shown to you.
For Bill Pantazis, owner of a pool concreting company in Australia, ensuring that you take the necessary time to go through all of the details you possibly can is a bare minimum. “Taking over a business is a very big job, and it doesn’t happen overnight. You need to make your decision based on detailed and insightful research that leaves no stone unturned, otherwise, you’re leaving yourself open to potential errors early on into your tenure of the new business.”
There are hidden problems that start to emerge the more you dig into a business. This includes ownership of the property, security issues, and/or other debt that is on the balance sheet.
Overlooking The Company's Lack of Branding
Just because a business has good fundamentals doesn't mean it has a good brand in the industry. This is a serious hurdle when the image itself has taken a hit due to PR issues over time. You want to be aware of these problems to make sure you weigh the risks of joining your name to the brand itself.
You will want to know what the target audience has to say about the branding too.
It is common for new business owners to start making significant decisions that change the structure of the business entirely. This includes merging as soon as the purchase goes through.
Pressure wash entrepreneur Matt Parker recently took over a cleaning business himself and emphasises the need to take the necessary time to get things right. “If you go in too fast, you’ll miss a lot of critical things that are important cogs in the business operation. Making too many changes too quickly can also alienate a lot of the people who were in the business before. That’s why you need to not necessarily take as much time as possible, but take enough time to get everything ready.”
Merging too quickly is an error as it doesn't allow you to get a read on how the business is doing or what it requires moving forward. This rushes the transition phase and makes it harder for the business to flourish.
Getting the Wrong Read on the Valuation
It is easy to go through the basic financial information but it is the inner details that are overlooked. The goal is to go through each detail including the assets, balance sheets, cash flow statements, and anything else you can get your hands on before buying the business.
Choosing the Wrong Type of Business
It is wrong to go out and buy a company that is out of line with what you are passionate about. Even a great business opportunity can be bad if it is not on par with what you love doing.
Patty Leglise runs a landscaping business and stresses the importance of getting involved with something you have an interest in. “As a passionate landscaper myself, I love being involved with my company. But for someone who doesn’t care about gardening, this would be a wasted venture. Money is obviously a very valuable asset, and you shouldn’t invest it in things that you’d forget about or aren’t intrigued by.”
This can lead to serious issues down the road regarding passion and your love for the work itself. This can become challenging and end up being one of the worst decisions of your life leading to significant debt too.
As you are now aware, buying a business is not something that you can treat as a plaything. You need to take a lot of things into account before taking the plunge, and even then, there’s still so much to know. That’s where Network Infinity business brokers come into play, great businesses for sale.
The team of experienced professional business brokers at Network Infinity have been involved in numerous transactions and knows what prospective buyers need to look out for. Get in touch with the business broker team today to learn about the next steps involved in purchasing a business. Talk to us today about businesses for sale and let us find that perfect business or help you sell your business.
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