Things you may fail to investigate before buying a business

Things you may fail to investigate before buying a business

The game of buying a business often boils down to knowing the obvious and not-so-obvious. Though factors such as financial statements, sales records, economic stability of the business location, and the asking price convey the bigger picture, the not-so-obvious is what will steer the buyer or seller towards his/her intended goal, and untangle the knots for making an informed decision.

# Knowing why the business is for sale

How many entrepreneurs do you think will be ready to sell off their passionately-built business? It requires as much determination and effort as that of building the business itself. It doesn’t come that easily. That is why, as a buyer, you need to understand the seller’s intention behind the selling decision, as it will unravel crucial points required to consider the buying decision. It all depends on whether or not the business owner will be able to give you a convincing reply.

# Customer concentration

Knowing customers’ intentions and their behaviour is often overlooked by the buyer during the sales process. A buyer would want to know if the business in question has multiple revenue streams and where the bulk of the revenue comes from. Is the business dependent on only one or two strategic customers for the bulk of its revenue? The buyer should ensure whether those customers will stay put or simply move away after the business has been acquired.

Key Employee retention:

It is a strategic decision whether to retain the key or top–of-the-line employees which squarely depends on the dynamics of the buyer-seller relationship. It always pays to retain the war horses, as they know their customers better than anyone else and maintain enhanced customer relationship even after business acquisition. At the same time, star employees should be given a fair opportunity post business purchase.

Government regulatory constraints:

Government regulations that govern businesses may differ from region to region. How well the business is compliant with the government regulatory constraints plays a major role in the continuity of business operation. It’s important to have a solid understanding of these constraints before going forward with the purchase. Equally important is to realize that one small change in the government policy can hit the business’s bottom-line overnight. Don’t just go with the positives as already mentioned in the blog. You need to have an open ear to capture what it takes to put your best foot forward when it comes to buying business.

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