Buying a business or taking a controlling stake in a company is essential for a couple of things; quick expansion and acquisition of talent and skill. However, making a decision to buy a company shouldn’t be taken lightly.
From due diligence to negotiating price, if you’re considering buying a business you should have a simple checklist in your head before making that offer. Here are a few things to consider:
Get Professional Advice
Speak to the right people before buying a business. They can provide insight into what you should be looking out for. These include other entrepreneurs, analysts, and even lawyers, who will be able to provide you with their experience and expertise.
This is essential to understand what really goes into buying a business.
Valuing that business
The value of a business is determined by considering many factors, including intangibles. Often, we purchase businesses that are down on their luck or have potential to grow, without the actual numbers to back it up.
Before getting too enamoured with the business, try to understand whether there are fixes to internal issues and if there is the right team in place to help you turn around their fortunes. Also when purchasing a successful company, it is best to understand their revenue model and sustainability.
Comprehensive Due Diligence
Do everything to find out about the company’s claims and background before even considering a purchase. A pretty balance sheet is great, but if everything under the hood is broken, it might not be worth expending the effort to fix that company.
Having someone shadow the team for a while may help you better understand how the company runs and if there are unreported issues that may impact it in the future.
Beware the Desperate Seller
Desperate sellers may offer great prices, but also carries serious risks that may outweigh the benefits. We can’t say definitely to avoid them, but careful consideration is necessary in these cases. Don’t rush due diligence or at least a certain level of quality checks just because you want a discounted deal. It won’t be worth it.
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