When to Buy: Five Questions to Ask Before Buying a Business

Knowing when to buy a business is just as important as knowing when to sell. It is generally accepted that buying an existing business is less risky than starting one from scratch, though there are exceptions. There is always an element of risk when it comes to starting, selling, or buying a business, and it is important to ask the right questions before diving in. Of course, there are a number of items to consider before buying a business. The following five questions are meant to get the ball rolling and to help you carefully consider your next move.

  • How much do I know about this industry? It takes a lot of energy, time, and tenacity to run a business, even when you are an expert in the field! Too often people with a little bit of business experience will jump into an industry they know little about simply based on some baseline skills and networking connections. It doesn’t work that way, unfortunately. Now, this doesn’t mean that you shouldn’t venture into something new. You may need to invest in learning about an industry and immersing yourself in a community before making the plunge. Knowing when to buy is acknowledging your limits but being willing to learn.
  • What size of business am I looking for? This question is meant to have you thinking long-term before you buy. What is a good size business for you now, in five years, in 10 years, and beyond? Do you want to buy a business that has room to grow or one that has reached capacity? There is no one-size-fits-all business and knowing when to buy means thinking ahead and looking at all the angles.
  • What is the best location for me and the business? This is an important question to consider as you decide when to buy. Do you have a family in a certain area? Are you looking to move or travel more often? Owning a business is very hands on, especially at the beginning. While you can get away with remote management, especially in certain industries, it is not optimal. The location within a region, city or a neighborhood are all incredibly important factors as well. Take location very seriously as you consider buying a business.
  • Is this the right time to buy? Figuring out when to buy a business is ultimately centered around it being the right time or not. The confidence that comes from being prepared, knowledgeable, and financially stable before buying a business is priceless. Additionally, you must look at the market and the industry’s trajectory as you decide when to buy.
  • What is my exit strategy? Now, why would you consider an exit strategy before you even buy the business? Because planning is imperative for success. Knowing how you want to eventually leave a business will help you investigate a potential business more thoroughly and help you formulate a better all-around plan.
  • Buying a business is exhilarating. The start of something new and the potential for growth and success makes it a venture worth investigating. But, knowing when to buy and asking the right questions must be a priority. If you are looking for assistance in buying, contact Sunbelt! As the world’s largest business brokerage firm, we have the experience and resources to find you the best opportunity to fit your needs.

John Davies

After obtaining his MBA, John began his career at PriceWaterhouseCoopers, the international accounting and consulting firm, and subsequently joined Progressive Corporation, a large U.S. based insurance company. John was a Division President at Progressive and subsequently became the CEO of a New York based private equity investment company. In 2001, he founded MMI as a platform investment company and MMI has subsequently acquired 15 additional companies.

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