Tips for Buying a Business

If you’re about to buy a business, you may feel incredibly excited about the road ahead. Finally, you get to realize your dream of becoming a business owner! Nonetheless, it’s important that you don’t allow this excitement to cloud your judgment when it comes to finalizing agreements with the seller. 

There are several things you should consider before closing the deal. Take a look at our tips for buying a business to ensure you’ve completely covered your bases in advance of making this monumental decision. 

Consider Getting a Non-compete Agreement

With so many details going into the negotiation process, you may underestimate the importance of including a non-compete agreement into the final purchase and sale agreement. This type of agreement is beneficial for the future security of your business as it guarantees that the seller won’t compete with you for a set period of time. 

“No solicit” and “No recruit” agreements may also be worth considering. A “no solicit” agreement prevents the seller from soliciting your customers, while a “no recruit” prevents them from poaching their former employees after the deal closes. 

Understand the Role that Key Employees Play

Many businesses that experience success do so based on the hard work of a few key employees. If you happen to lose these employees during a transition, you may find that you’re left with a different business than the one you thought you’d purchased. 

Putting in the effort to keep some of the most important employees in their roles can go a long way in maintaining successful business operations throughout your first crucial months as a business owner.

Depending on the situation, you may even want to negotiate a way for the selling owner to remain at the business in some capacity for an extended period of time. This could involve a structured payment plan or incentive plan to encourage peak performance and a smoother transition. 

Avoid the Pressure Trap

Too often, sellers will try to pressure potential buyers into rushing the decision-making process by telling them about all the other potential buyers jumping at the bit to purchase the business. However, these contenders aren’t always real, and these claims shouldn’t necessarily be taken seriously. 

If you feel pressure at any point during the negotiation process, don’t hesitate to take a step back to reevaluate your priorities. Most importantly, never fall into the trap of thinking that it’s worth proceeding simply because of all the time you’ve spent to get to this point. The worst-case scenario is not wasted time, but rather owning a business that you regret purchasing. 

Don’t Overlook Dishonesty

Be wary of sellers whose documents show that they’ve been fibbing on their tax returns. While they may claim that “everyone does it,” you can be sure that if they’re willing to be dishonest with the government, they won’t hesitate to be dishonest with you either. 

If you decide to proceed with a business owner who’s been underreporting their sales, you’ll need to do extra homework to ensure that you won’t be held liable for their behavior. In addition, you’ll want to have all the information they’ve given you independently verified to sort out what’s fact and what’s fiction.

Partner with a Business Broker

Are you in search of tips for buying a business because you feel overwhelmed by the decisions you’re facing as you navigate this complicated process? An experienced business broker can provide much-needed guidance and help you sidestep any pitfalls along the way. 

At Murphy Business, we understand how stressful it can be for first-time buyers to enter into negotiations on their own. You can rely on our professional brokers to assist you as you make important decisions about your future. We offer trusted valuation services, negotiate on behalf of our clients, and can help with drafting a final agreement that allows you to seal the deal with confidence. 

If you’re looking for more tips for buying a business, our business brokers are ready to help. Call Murphy Business today at (888) 561-3243 to speak with a professional business broker near you.