There are many things to consider when you purchase a business. And changes in the US economy in the past few years mean there are some new things to look out for as well. But purchasing a business, especially in this current economic climate, can still be a great idea, if you avoid some common mistakes.
Don’t Rely on Your Intuition Alone
Don’t rely on your own intuition when it comes to the market and trends in your industry. This is where a business broker can help. It’s crucial that as a buyer you are aware of the current state of the business, for example, area real estate trends. Make sure that you have adequate capital to make changes and improvements. Many new business owners are blissfully unaware of how many improvements are needed, until it is too late.
Take Time to Plot Your Course
When you buy a new business, you’ll be tempted to change many things about it immediately. This might not be the best use of funds. Focus instead on the intangibles; for example, customer service, marketing and hiring the right people. Whenever possible, use online sources like craigslist for used equipment. Don’t invest too much capital into the business at first; instead look to be agile and responsive to new opportunities. For instance, are there ways you can expand the market for your product or service that the prior owner has not exploited?
Leverage the Good Side of Slow Growth
There are some benefits to a slowly recovering economy. Real estate costs may be lower, and employees willing to work for less. Other businesses looking to cut costs may be willing to use your services if they are competitively priced, rather than relying on prior relationships.
Research, Research, Research
Why is the previous owner selling the business? This is probably one of the most un-asked questions when to comes to business buying. There’s a reason why it’s up on the market, and that reason might mean that the business is a poor fit for this economy. This is where a business broker can be essential. A professional understanding of the owner’s rationale for selling, and the potential for profits, is important when purchasing a business.
Business owners usually agree on one point – there is never a “perfect” time to start a business. However, some preparation and help from professionals can reduce your risk when starting or buying a business.