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Buying a business is a huge decision to make! Before going through with any purchase a few things must be done prior to considering a sale. It’s important to understand exactly what you’re buying and getting yourself into, especially for new business buyers. From paperwork to asking the right questions, here is an initial overview of what to consider before completing a sale.

Financial Statements

The first step when assessing a new business that is under consideration for purchase is to review any and all financial statements and documentation. Understanding the business’s legal status and assets is also important. This includes inventory, equipment, and accounts receivable. 

When assessing business value, it’s financially smart to reach out to an advisor for professional input and guidance. This ensures that you are gathering all information needed and getting a second or even third pair of eyes on a business listing is always a great idea. 

You should additionally confirm the overall soundness of a business listing. For example, if the business makes a majority of its profit from a small group of returning customers, it’s important to ensure that these customers plan on continuing purchasing from the business once ownership has changed. If not, this business loses some value due to a decrease in customer retention. The significance of this value is determined by the percentage of sales within that customer group.

Thinking Ahead

When planning to buy a business, it’s important to take into account any changes or plans you have for the business after purchasing. Measuring the ratio of current profit to expected profit after upgraded expenses are put in place is key to distinguishing the actual value a business is worth to you. This helps ensure you select the best possible business for your needs and your buck. 

Look Into Liabilities

As a buyer, it’s vital to look into the liabilities of a company you are interested in buying. Especially if any outstanding charges are set to be the responsibility of the new owner. Any additional charges decrease business value and if unaware, add additional charges onto the original asking price. 

When buying a business there is always some type of risk. However, eliminating as much risk as possible is key for a successful investment in any business. Having open communication with the seller helps confirm any unanswered questions and establishes a relationship for a confident sale. Having a sour relationship between buyer and seller is never a good sign for a prosperous business sale. Additional advice and guidance through professional services would also be helpful on your journey to buy your next business!

We’re Here to Help!

At Murphy Business, we understand how overwhelming and complicated buying or selling a business 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!