If 'done properly', buying a business can be very exciting, rewarding and life-changing. If 'not done properly', it can also be life changing, but for all the wrong reasons!!
Quite often a prospective buyer of a business lets the excitement get the better of them and they do not complete the necessary homework or they 'let their hearts rule their heads' and they overlook some negative aspects. We believe that buying a business is too serious a decision to take short cuts.
Some of the more common mistakes people make when buying a business are
- they pay too much
- they get 'excited by the dream and don't see the warts'
- they run out of cash within 6 months
- they are not properly structured and lose their house
- they set it up in such a way that it becomes difficult and costly to sell
- they don't properly read or understand the Purchase Contract or Agreements
- if they are buying with someone else, non-aligned owners wan to take the business in different directions
If you're buying a business for the first time the chances are you will underestimate how disjointed and lumpy your cash flows will be. The problem is that your outflows will be fairly consistent (eg debt repayments, staff wages, rent, insurances, GST payments, household expenses etc etc). It is often said about business owners that they are the last ones to be paid each week!
Also, there are many aspects to business risk that owners don't always consider. These risks are either internal to the business or external to the business and unless you are experienced at 'business risk analysis' you WILL overlook some of these risks. We have various tools that help you identify and assess these risks.
Don't buy a business until you're sure you've addressed ALL of these areas (and more!). Speak to us for independent advice. Our friendly, professional team will help you enjoy the process of buying your business.
See also "Acquisitions and Mergers" under our Specialist Services.
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