Things to Watch Out For When Buying a Business

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Things to Watch Out For When Buying a Business

Failure to disclose information

You should be wary of a seller who is failing to disclose important information, such as why they’re selling, the lease, licences, permits and staff.

Poor business performance

Be wary of sellers who are subject to:

  • pending litigation
  • have a record of customer complaints
  • talk up the cash trading
  • drop the sale of their products or services to bump up gross sales before selling the business.

Make sure the business you buy is not overvalued by completing financial due diligence. Have an accountant analyse the financial information provided by sellers to see if a business is profitable.

Sellers behaving badly

Watch out for sellers who won’t allow a trial period, won’t introduce you to suppliers, the landlord or estate agent, make the deal seem too good to be true (it probably is), are keen to close the deal quickly and give in too easily to an offer.

External issues

Look out for a business that own rights over copyright or other intellectual property, landlords who only give short leases and leaseholders who offer the business for sale at reduced price, but then offer you the same lease at a premium.

Set your goals

Even though you’re planning to buy an existing business, it’s essential to review the current operating processes, cash flow, and marketing strategies to see if they need refreshing. It’s also good to set goals on how you want your business to look over time.

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