Buying an Existing Small Business
Don’t just buy an existing small business without examining first the assets, liabilities, financials, and other aspects. It is important that you consider tangible and intangible factors so that you can make an informed decision.
Buying an existing small business is no joke so hire a lawyer and accountant to help you with the analysis.
Hiring a Lawyer and Accountant for Buying a Small Business
As a new entrepreneur, you might be choosing between starting your own business and buying an existing small business. You’re at an advantage when you buy an existing business because it is already in operation. Aside from that, the business has already gained reputation and is known to the target market already. Still, there are advantages and disadvantages when buying an existing business. You have to examine these factors carefully so that you can make the right decision. Starting from scratch can be difficult but if you want to be successful in buying and managing an existing business, there are some things that you should consider.
There are tangible and intangible factors that you should consider. Why is it that the owners of the small business want to sell it? The owner should provide you with a good reason. From there, you can already conduct a background check. Ask competitors, customers, suppliers, Chamber of Commerce, trade associations, and neighborhood programs. You will need to hire an accountant to help you out as well as a lawyer for the legal matters of the sale. These people can also help you with the analysis. Taking a good look at the financials of the existing business can reveal a lot about its status.
Buying an Existing Small Business – Checking Assets, Liabilities, Etc
Check the assets and this will include contracts, cash, inventories, receivables, equipment, and physical properties. You also need to examine the existing condition of these assets. You should be aware that old receivables can be treated as bad debts while the outdated equipments can be quite costly to repair or replace. The accountant should also examine the liabilities like outstanding liens or loans, mortgages, accounts payable and unpaid taxes. Accrued liabilities should be reviewed carefully. The lawyer can also help you with some issues on the liabilities especially if you decide to absorb them.
Before buying the small business, look into the financial aspect. The accountant can already do this task. You have to ensure that the business is still viable or else you’re going to loose out. Different financial statements should be examined with care. The business should also have competitive advantage to ensure that you’re getting a good market share percentage. When everything is set and you’re convinced that the business is worth buying, close the purchase so that you can now run your own small business. Be prepared to invest time, effort, and money if you want to start making profits soon. Also, try to buy a business that you’re passionate about.
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