1. Don’t Be A Square Peg In A Round Hole

Is running your own business right for you?

Starting a small business isn’t just about changing careers; it’s also about changing lifestyles and attitudes.

Before you start, it’s important to consider what kind of person you are, what your personal and career goals are.

Are you suited for the challenges, the uncertainties and, ultimately, the rewards of an entrepreneurial life.

The financial rewards if you get it right are of course very appealing but perhaps more so is the freedom to control your own destiny.

2. Choosing The Wrong Business For You

When larger corporations do this they call it ‘acquisition profiling’. For you, it will probably be a series of questions such as: What kind of business do I want to buy? How do I know what business is right for me? Where do I start?

You will also need to honestly appraise your own experience and skills in order to determine whether a specific industry will suit you.

Think about your own strengths and weaknesses, and focus on the business that is right for you and your needs.

Make sure you know what you are looking for before you start looking. Take the time to fully define what it is you want from the business and write it all down.

3. Not Getting Good Professional Advice

Once you know what you want to do the next important step is getting your team together.

You know the old saying; “you get what you pay for”, well this is one area not to skimp on. Good advice from seasoned professionals, especially if this is your first time buying a business, could save you both money and heartache.

Make sure you have a reputable solicitor and accountant, and consider enlisting the help of a commercial surveyor and business broker. They will oversee local searches, check legal implications and analyze the accounts.

4. Not Knowing Your Financial Situation Accurately Beforehand

Once you know the type of business you are looking for, do your financial planning.

With your accountant, prepare projected cash flows and profit & loss accounts to cover different possible scenarios. From this you can then have a much more accurate idea of any borrowing requirements that may be needed.

5. Not Getting Loan Approval In Principle Before Looking

Once you know what you need to borrow, go and make sure you know you can arrange the loan.

Having your loan approved early in the process in principle, allows you to know with confidence how much you have to spend and avoids wasting both your and the seller’s time.

6. Not Doing Your Homework Before Hand

Research your intended market sector or industry using the trade press, the internet and even word-of-mouth. This will help you know what the right questions to ask are.

Visit the prospective business in person. Be discreet as the owner may not wish staff or clients to know the business is for sale.

Look for areas where you feel you can make a difference once you are in charge.

7. Not Knowing The Right Price To Pay

Assessing the value of the business you are interested in buying is key to making a good buy.

Always seek professional advice from accountants, lawyers and business brokers at the appropriate time.

If you neglect to find out the true market value of the business or any commercial properties involved, you will be bidding blind.

When you finally come to bid on a business, know what price you are willing to offer. Set your upper limits and then stick to them.

It is all too easy to get caught up in the emotion of the moment and end up going beyond your pre-determined limits.

Remember, ultimately the business is only worth what you are willing to pay for it.

8. Moving Too Quickly

Be aware of high pressure sales tactics implying limited availability and time schedules that you feel put you under pressure.

Don’t allow yourself to be rushed or pushed into a quick sale. Take the time you need to make the right decision.

Remember, as a buyer, you hold most of the cards.

9. Not Doing Due Diligence

What is due diligence? Well, it’s a fancy term – used by accountants and lawyers – to sum up the process of making sure the business is what it says it is.

When buying any business it is important to ensure that the seller let’s you and your team inspect all of the vital documents and financial records.

For example, it is very important to have a complete title search made to ensure the title to your new business and/or Commercial Property that may be involved is clear and without liens, encumbrances or claims of any kind.

Make sure to have a survey done on any property which clearly shows the boundaries of the property and the condition it is in. Any unexpected repair property repair bills are bound to be  both a surprise and significant in size.

10. Not Following Through When The Right Opportunity Comes Along

Okay I know this may look a little contradictory to an earlier point about not moving too quick, but they do go hand in hand.

If you have done all of your homework, if everything looks right and feels right, then don’t miss out on what could be the opportunity of a lifetime due to irrational last minute nerves.

Summary

Take the time to prepare properly. Set your plan for buying your new business, making sure to avoid the preceding ten pitfalls and you should be on your way to an exciting new chapter in your life.

In control of your own destiny, an entrepreneur and provider who can look forward with confidence and anticipation to a successful new future.

Remember, knowledge is king and you are accumulating that knowledge through articles such as this, at an encouraging rate.

This article was written by Brian K Fitzgibbon CPA.

Brian is an experienced accountant and small business consultant. He runs his own business, lectures extensively on small business topics and has checked out and valued many hundreds of small businesses for buyers.

Brian is also the author of the highly acclaimed and invaluable
"How To Value A Business And Buy It Without Fear"
A do-it-yourself guide for first-time and experienced buyers alike.

To download a FREE Chapter from Brian's book please follow this link: "HowToValueBusiness.com"

April 26th, 2009 | Tags: 10 mistakes to avoid, buy a business, buying a business tips | Category: articles | Subscribe to comments | Leave a comment | Trackback URL  |