5 vital questions to ask when buying a business
Many Kiwis have the goal of running their own business, and buying an existing business is one way to fast-track this into reality. Expanding your existing business through the acquisition of another company can also be a strategic move worth considering. Whatever your starting point, it's essential to ensure you're making a wise investment and not acquiring a troubled business.
Conducting thorough research is a crucial part of the buying a business process, and asking the right questions can provide valuable insights into the viability of the purchase.
Before making an offer, here are five important questions to ask:
Why is the business for sale? Understanding the reasons behind the sale is essential. Some reasons may raise red flags, such as declining sales, increasing debts, internal issues with staff, or an outdated market for their products/services. Identifying the true motivation behind the sale helps you avoid potential pitfalls.
Is this a promising industry to enter? Conduct comprehensive research on the industry, competitors, and current market conditions in which the target business operates. Entering an industry with growth potential, stable revenues, and potential profits is crucial for your future success. Studying predictions and forecasts for your chosen industry niche is a smart move.
Have you performed due diligence on the business? Doing your due diligence is vital to uncover any financial, legal, or HR issues that might become your responsibility as the new owner. Look into matters such as unpaid taxes, defaulted loans, ongoing legal cases, and the company's financial history. Addressing these concerns before the acquisition can prevent significant headaches later on.
Does the business have an existing business plan? Evaluating the company's existing business plan is essential. It should outline a clear path for future growth and provide you with a roadmap as the new owner. Assess the plan's relevance and recent updates, as well as how well the company is progressing toward its milestones. Be prepared to review, update, and refine the strategy post-acquisition, as no plan is set in stone.
Are the management team and staff proficient? Acquiring a company also means inheriting its management team and staff. Ensure that the team possesses the necessary skills, experience, and motivation to drive the business forward. Engaged and talented employees are vital for the success of your new venture. Consider whether the existing team is sufficient to meet your business goals and objectives.
Talk to us first
Buying a business can be complex and time-consuming process. We highly recommend seeking professional advice and guidance. If you’re thinking of buying a business, talk to us. Our team can help you navigate the process and distinguish between worthwhile opportunities - and potential risks.
From conducting due diligence and relevant checks to developing a new business plan and strategy, our team is committed to turning your business purchase into a success.