The checklist for finding a business for sale is long and tedious. Sometimes, you are not sure of what you should be looking for and what you should ignore. However, there are bare minimums that are an absolute must for you to know when considering which business to buy. Such information can guide you on whether the business is a worthy investment or you’re better off continuing with the search for a business to buy.
Why is the business being sold?
Your first question would be why the owner is selling the business. There are quite a number of reasons why a business might be on a market and some of them include a sinking business that is crippling under the weight of debt, or an owner looking to retire or move on to another business.
If the owner is unable to give you a good and compelling reason why they are selling the business, it should be a red flag for you to stay away from it. If possible, you can also ask around if you have the contacts and see if there is any conflicting information or answers that might indicate that the owner is not being completely honest with you. Sometimes, the best way to get such information is getting in touch with some of the customers or employees.
Concentration on customers
Different businesses run under different models. There are those that rely on a handful of customers for a majority of their revenue and there are those that have a ton of customers. This is especially true if a business is a local business, such as a business for sale in San Diego, that is reliant on creating revenue with local customers. It is important to find out if these customers will stick around after the sale has gone through or if you will have to build a fresh customer base. This is more so the case for businesses that have very few customers.
In case these customers are not willing to stay with the business, you also need to know if the business will be able to stay afloat and thrive without them. Knowing your customers is going to be a key aspect in finding the perfect business for sale for you to invest in. You also need to know how diverse your niche is and how easy or difficult it is for you to get new customers for your newly purchased business.
Are the employees willing to stay?
Once you find the right business for sale and the sale goes through, there will be an adjustment period. One of the best ways to mitigate that period is to find out if key employees are willing to continue working in the business. You can work with the owner to identify key employees that would be critical in this phase in case you don’t want to keep everyone. However, some of the key positions that you might want to consider include the sales staff and the accounting staff.
Government regulatory constraints
Businesses in different fields have different government regulations that they have to follow. If the business you are looking to buy has such regulations, you need to know and understand what they are and what is required of you before you proceed with the purchase.
It is also important to find out if any of those regulations are expected to change in the near future and if so, how that would affect your cost of doing business. In some cases, these changes could even lead to a business being phased out, so you need to be sure that the business you are interested in is safe for the foreseeable future
These four areas are key to identifying a good business to buy and making sure that you put your money in the right investment. If everything checks out, your experience in finding a business for sale might end up being very fruitful.