Buying a business is a big decision to take and, while the rewards can be huge, if this is your first time buying a business it is worth looking at your personal situation to ensure you are prepared for the upheaval that can also come with such a change. Here is a list of five questions worth asking yourself early on in your hunt for a new acquisition.
1. Are you ready for the lifestyle change?
Running a business is a hugely rewarding endeavour. You will reap the profits of your efforts directly and will be in control of your own financial future and career. But these benefits come with costs, namely time and risk. Make sure you and your nearest and dearest are aware of and prepared for the demands that owning your own business can put on you.
2. Who will run your business?
Once you've decided you are willing to accept the responsibility that comes with buying your own business, you can consider your options in terms of making daily life easier. If you're happy to be accountable for the daily running of the business you should be able to save money on management staff. But be prepared to be on-call whenever you're needed. With this question, you may well have to be open to negotiation depending on the individual business, but it is worth deciding what your preference is in advance.
3. Is now the right time for buying in your sector?
Buying a business is a big step, especially if you're a first-time entrepreneur. So don't rush into it. The economy is still struggling at the moment and some industries are being particularly hard hit. Take some time to weigh up what kind of business you want to own with which areas of the economy are most profitable at the moment. Anytime spent waiting for the your preferred industry to return to growth won't be wasted, you can monitor the market and current opportunities to ensure the business you buy in the end is the right one at the right price.
4. Does your investment add up?
Essentially, make sure you do your sums. If you can't afford to invest in a business with your personal funds, then think carefully about borrowing money… and how and when you will repay it Overlooking financial discrepancies now is going to hurt a lot in the future so don't rush this stage.
5. What is your exit strategy?
Finally, something many first-time entrepreneurs neglect to consider early-on in the buying process is an exit strategy. If you have any partners involved this is even more important because you will need to establish a buy-sell agreement to ensure you all have a way out. You also need to be aware that you could well have to get out sooner than expected if your personal financial situation changes, so write this into your plans.