3 Questions to Ask Yourself Before Buying a Small Business
Buying a business can be an exciting and overwhelming venture. In order to obtain the most benefits, however, you have to choose the right business to purchase. Which one is the right fit depends on the answers to several important questions you must ask.
You can find much advice on what questions to ask owners about their companies. Before you take that step, though, you must first ask yourself the following questions to avoid any regrets.
1. Why do I want to buy a business?
There are pros and cons to buying an existing business instead of starting your own. Make sure you have weighed them according to your circumstances to ensure you are making the right choice. As you look at business options, consider if you have an interest or experience in each’s industry. A business may have potential for or a record of high returns, but if you do not understand or care about the industry, the business is not likely to be or stay successful.
2. Do I have the means to buy a business?
Making money takes money. The sale price of a company that interests you is not the only relevant factor. You must also take into account the following:
- Your available funds for a down payment
- Your credit score
- Assets and collateral you have
- Financing options available to you
Even your experience and business plan play a role in your ability to receive loans and other financing.
3. How do I plan to run a business?
Before you take over as a new owner, you need to have an idea of how you want to run your business. For example, will you maintain the company culture, policies, technology and appearance or will you change them? Will you keep current suppliers, management and employees or acquire new ones? How will you calculate your salary? If you are new to the business scene or a particular industry, it may be helpful to discuss these questions with a business attorney.