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The number of entrepreneurs in society today is growing rapidly. Many graduates from universities and colleges around the world join in on this title each year. With more entrepreneurs in the world, the buying and selling market for businesses is exceptionally active. 

Business transactions in the buy-and-sell market are occurring more frequently. Why start in your garage and possibly spend several years waiting for your business to take off when you can buy a business that is already established and running?

Although some individuals are industry-savvy enough to take on a business that is up and running, the buying and selling process can be complex and overwhelming to others. This causes some mistakes to be made throughout each stage in this elaborate process. Avoid these 3 common mistakes when buying a business!

Mistake #1: Underestimating Your Timeline

Buying a business is not a quick and easy process. This process takes some time and planning to execute efficiently with satisfactory results for both the buyer and seller. Finding a company that’s right for you can take several months to locate your perfect fit. You will most likely explore over 100 options before finally signing. 

Buying a business is an emotional investment as much as it is a financial one. Your perfect fit is out there but may take longer than expected to find. When buying a business, don’t underestimate your timeline or rush a decision. Take your time and really consider what values in a business you appreciate most.

Mistake #2: Financial Confusion

Profit margins and business financials are confusing to most people. It’s hard to understand every element within the buying process, but it is essential to understand what drives business profit. 

Always ask plenty of questions, especially when it comes to margin review when buying a business. For example, why is this margin higher than the industry average? Can I see some earnings management paperwork? Go deep into understanding financials. Financial confusion can end up being a disastrous mistake for buyers in the business transaction industry. 

Mistake #3: Overestimating Value

When running financial models, make sure to focus on the bottom-line free cash flow, as many investors underestimate their future capital expenses. These capital expenses include any investments, business equipment, etc.

The best advice we could give you when distinguishing the value of a business is to trust your instinct. Take time to reflect on what parts of each possible new business are valuable to you personally and financially. Long-term financial success should be a top priority during this process. It’s better to pay too much for a good business than too little for a bad one. 

We’re Here to Help!

Looking to buy or sell a business? At Murphy Business, we understand how overwhelming and complicated this process can seem. Finding the right business to buy or the right buyer to sell to is a lot of work. That’s where we come in. Our experienced team will help you find the right buyer for your business or the right business for your buck! 

Contact us for more information and connect with an expert today!