What to Look For When You Invest in a Business
You may be a successful business owner, but when you need to invest in a business for your next venture, there are a few things that you should look out for before diving into the purchase. Here’s what you should consider:
Property – Look at the property and see what kind of shape it is in. You might think that a few renovations can fix anything, but some properties need more work than others. In addition, look for any liabilities on the property such as easements or encroachments from neighbors’ land onto your new business’s property line. These may not be insurmountable obstacles, but they do require a certain amount of knowledge before you make a purchase.
Fixtures – Sometimes all it takes to turn around a dying business is a little bit of fresh paint and some basic renovations to make things “like new” again. However, you’ll also want to look towards fixtures and equipment that are broken beyond repair or ones that just don’t fit in with your vision for the new business. When you buy a business, be sure that you’re also buying all of its assets and liabilities.
Inventory – In addition to looking at what’s on the shelves, look into how much inventory that the previous owner had on hand when they were closing up shop. You may want to do some comparison shopping to determine whether or not he sold everything before he moved on from the business, which can help you price out new inventory once you move in.
Employees – Look over any contracts that former employees might have with the business and make a determination about whether or not you’ll need them going forward. A contract doesn’t necessarily mean that their talent is wasted on your small company, but it does mean that you’ll have to put in some time and money making sure they’re comfortable in your new business.
Franchise – If the business is a franchise, then you will need to meet with the franchiser before purchasing it. Make sure that you are aware of all fees associated with ownership and when they are due, otherwise, you might run into financial problems when the bill comes around.
Accounting System – So much about running a successful business depends on how good your accounting system is. If you buy an existing business, make sure that its accounting practices are up-to-date, or else you may be buying trouble next tax season. It’s better to start fresh instead of taking over an established system that doesn’t do your business justice.
It’s important to make sure that your future business is a sound investment before you officially buy it. While some of these things may not be deal-breakers, they can make or break how much money you put into this new venture and whether or not your gamble pays off in the end.
Determine what should be tweaked, replaced, or removed before you buy so that you don’t have any unpleasant surprises along the way.
First and foremost, do not let yourself get blinded by promises of high returns from self-proclaimed experts or those who promise that they’ve been making money from the internet since they were old enough to use a computer. It is important that you remember that corny lines such as these are usually thrown around by scammers – so avoid falling prey to investment fraud. Scam artists have recently been coming up with more and more elaborate ways of convincing unsuspecting individuals to part with their money so it’s crucial that if something sounds fishy, it’s best to avoid the investment.
it would be best to avoid investing in a business selling a product or service that you don’t know anything about. Investing your money into something that you have no knowledge of is going to put you at a disadvantage because it will be difficult for you to determine whether the investment opportunity is a good one or not without knowing what the risks might be. With regards to this, it’s best to invest in something that you are also familiar with already – such as an industry or market that you’ve been working in before. When trying out new ventures, always make sure that they’re appealing enough and interesting enough so as not to bore yourself too quickly.
Last but definitely not least, when negotiating for the purchase of a business, never forget to check for what’s called the ‘intangible assets’ of the business. Intangible assets are basically assets that cannot be easily seen or felt – such as reputation, goodwill and intellectual property. These intangible assets play a very important role in any business transaction because they determine how well the business will do in the future after it has changed hands. You should not sign on any dotted line until you’ve ascertained that these intangible assets are still intact (and in good condition) however if you do find out that there are issues with them, make sure to negotiate for their inclusion before finalizing the deal.
Secondly, you should not be afraid of asking pertinent questions. There is nothing wrong with understanding why certain decisions were made in order for you to make better choices – after all, that’s what intelligent people do right? For example, if you notice that your potential business partner has chosen a debt-ridden business for sale, then perhaps this person may already have some kind of financial problems at home.
Lastly, remember that an idea for an investment does not always translate into instant profit. Just because someone has decided to invest in something doesn’t mean that his or her money will simply grow on trees. It takes years of hard work and dedication before any tangible results can be seen so don’t get your hopes up too high.
You may be a successful business owner, but when you need to invest in a business for your next venture, there are a few things that you should look out for before diving into the purchase. Here’s what you should consider: Property – Look at the property and see what kind of shape it is…