What Not to Do When Buying a Small Business
By: Michaela K. - Business Outreacher
Buying an already-established small business can be a wise financial and career move, because, in many ways, the kinks regarding its success have already been worked out by the previous owner. That being said, the business world is full of stories about new business owners driving once successful companies into the ground.
If you have your eye on a small business, but you're a little nervous about what it's going to take to be successful, here is a list of what not to do when you're trying to decide whether you want to buy in.
Don't Pick the Wrong Business for You
Not every successful business is going to be the right kind of business for you to run, because you have a very specific knowledge, expertise, and set of skills that are unique to you. While you may love the idea of running a restaurant franchise, if you've never worked in the food industry before, you're probably going to struggle, no matter how successful the restaurant currently is. Look for a business that sits within the industry or industries you know and understand, and consider the kind of work you, as the owner, will have to put in.
Will you be in charge of managing a large group of employees? If you've never managed people before, that could be a problem. Will you need to engage in sales on a daily basis? You need to have some experience selling. The right business for you isn't just the one that suits your ideals or your price; it has to be more specific to the kind of work you know how to do and the experience you have doing it.
Don't Avoid Professional Help
Besides the bank that is going to give you the business loan, it's wise to enlist the help of a number of other professionals when you're trying to figure out what business you'd like to purchase. Sit down with a professional consulting and accounting firm like Wallace APC, and see if, when they run the numbers, the purchase looks as likely to succeed to them as it does to you.
Make sure your lawyer goes over any legal documents you need to sign. Talk to a real estate agent to ensure you're being treated fairly regarding building costs. Professional help will allow you to steer clear of potential trouble when you encounter situations outside your wheelhouse, so when you do decide to purchase a business, you won't be blindsided with emergency issues after the deal is finalized.
Don't Ignore the Nuts and Bolts
The devil is definitely in the details when it comes to running a small business, which means you need to get out the fine tooth comb when you're considering purchasing one. From labor costs and permitting expenses to taxes and insurance, running a book shop will often feel like it has nothing to do with books or reading at all. Get as detailed as you can about expenses, workload, employees, inventory, the day-to-day culture, customer expectations, cash flow, assets, and the like, because what you don’t know in business can definitely sink your ship.
Don't Overvalue It
Do your best to avoid setting your heart on a business before you've done all the leg work required to see whether or not it's a good fit. Paying more than you need to will make your operating costs more difficult to meet, and while owning your own hip salon in your favorite part of the city may be the culmination of a lifetime of work and dreaming, if you paid too much for it, you're going to suffer.
Be diligent about gathering all the information you need to ensure you don't pay too much for the business — it's one of the ways you can make yourself more likely to succeed down the road.
There are many decisions in life that can be rushed without dire consequences, such as what to order for lunch or which color bumper car to choose at the fair; however, buying a business is a decision that should be weighed carefully and over time. Whims are rarely your friend in the business world, and the first place to put any whimsical decision making to rest is in the buying process. Take your time. Get all the advice and professional help you need. See what family and friends think. If the seller starts putting undue pressure on you, resist. You financial stability requires a sound decision, and speed doesn't need to factor in.
Buying an established small business is a great way to invest your time and resources—so long as you succeed at running it. By following these tips about what not to do when buying one, you'll be more likely to achieve that goal.
Michaela K. - Business Outreacher
Michaela is a creative writer who touches on various niches that relate to her everyday life. In addition to contributing great content she also enjoys traveling and getting to know the world around her while continuing her education. Over the years she has built up many strong relationships within the blogging community and loves sharing useful tips with others.