If you are considering buying a business, you need to ask several questions. Getting the right information will be important in determining whether this is a smart decision for you. It will also help you decide how to best run the business after you have purchased it.
Three Questions You Should Always Ask Before You Commit To Buying A South Dakota Business
Question #1 - Do the financials seem sound?
The books are going to be very important if you are considering buying any type of business. As a buyer, you should be asking for bank statements and profit and loss statements. You may also want to see any contracts with employees, suppliers, or lessors. Long-term agreements with advertisers should also be reviewed.
Looking at the financials for specific product areas or by quarter can also be helpful. Smaller businesses may not have very detailed records but taking a look at what they have can be helpful. If they don’t have any records at all, or the records consist of receipts in a shoebox, that can indicate a problem. Tax records may also be a helpful place to start if the seller doesn’t have anything else.
Question #2 - Is this really what I want to do?
You may be considering purchasing a business because it is the hot trend of the moment or it seems like a good investment. However, you should think about whether this is something you actually want to do for the foreseeable future. Unless you hire a manager to run the day-to-day operations, it will be up to you to keep the business moving. Is running this business really what you want to be doing?
It might be helpful to watch what the current owner does or ask employees about their experiences. Talk to the current owner about what his daily life is like. You may find yourself in a situation where the current owner practically lives at the business - if that is not what you want to do, you may need to rethink the purchase.
Question #3 - Why is the current owner selling?
Ask the seller why he is selling. If he just wants to retire, that is one thing, but if there are signs the business is struggling, and the owner is trying to get out while he can, that may be more than you want to deal with.
You may also want to ask what the seller would do differently or what they would do with the business next if they were staying. Questions that focus on the future of the business can give you an idea of how the owner thinks it is going. It can also give you an idea of the business’s brand and how large a role the owner actually played in the success of the company.
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