Before you buy a business, you need to do a thorough examination of the business called due diligence. The first step should be the financial analysis that you do with your accountant—if the business doesn’t pass this test, there really isn’t any point in continuing to examine any other aspects of the business. A surprising number of people buy a business without doing their due diligence first—this sets new business owners up in a tough position, by not really knowing what they are buying.
As noted by sbgaccountants.com, “When you're investigating buying a business it's important to do a detailed review of the business's operations, finances, reputation and industry as part of what is called the ‘due diligence’ process.”
Financial Health & Wellness Check
The financial health and wellness check should include financial records for the business going back at least a few years. You will want to know what assets would be included in the sale, past sales, and future sales projections. Are the books well-kept, or do they need lot of work (which is a red flag just by itself)?
Why Is The Owner Selling?
Why is the owner selling the business? If they are retiring, that is an obvious reason to sell, but they might be getting out of this particular industry for a reason that you should know before you buy their business. Shaw & Associates can go over all the particulars of the business with you, pointing out all the strengths and weaknesses of your potential purchase.
Go In Armed With As Much Information As Possible
Buying a business and making a profit from it is not closing your eyes and jumping; it is a decision that needs careful investigation and planning. Having a professional accountant do an analysis of the business financials is a critical first step. Shaw & Associates would love to be your first stop if you are thinking of buying a business, and give you our best professional advice on the financial health of the business.
Here’s a video giving a brief overview of the steps involved in deciding to buy a business.
Contact Shaw & Associates Chartered Accountants for accounting help you can count on. One complimentary meeting with us will put you and your business on a more profitable and positive path.