Gwinnett CPA: Top Five Things to Consider When Buying a Business
Buying a new business is perhaps the most important financial decision you will ever make perhaps setting yourself up for financial success for life but at risk are your life savings and your very livelihood. Understanding and carefully evaluating these before you buy are essential to helping increase the future financial health and viability of your business:
Top 5 Things to Consider When Buying a Business
1. Staff. A careful on site examination of the staff and interviewing them will be essential to ensuring they are a workable team for you to start your business with. It may be prudent to have an exit interview with the present owner to ensure who is a good fit long term and what staffing changes might need to be done immediately. Also being able to ensure that all key personnel have an enforceable non-compete and non-disclosure agreement to keep your most valuable commodity from walking out the door with all of your clients.
2. Management. Even if you have a great staff and they are all committed to stay and your have readily enforceable non-compete and non-disclosure agreements it is most wise to be sure that you economically and legally “tie up” or bind your key management personnel to your business. Having your past owners involved in the transition period is frequently most advantageous but having them stay too long is frequently the forerunner of disaster and mixed loyalties and confusing messages delay any new direction or company direction you seek to take anew.
3. Speak the Language. For many proposed business purchases it is prudent to get to know people first before you decide to invest your life savings in a new business venture. Frequently it would be most prudent to agree to work there for an extended period for free to gain a sense for the business operation itself, competency of present staff and management and their business style. This will help you determine if you have a staff of plodders, mavericks, dedicated personnel and their aptitude for working together as a team. I would suggest working for four to eight weeks for free would be a reasonable period for making a well-informed decision. If you are unfamiliar with the industry you are considering an investment in, then it would be wise to extend this period substantially.
4. Be Hands On. Per the SBA web site at http://www.sba.gov/sites/default/files/sbfaq.pdf the “Bureau of Labor Statistics data on establishment age show that 49 percent of establishments survive 5 years or more; 34 percent survive 10 years or more; and 26 percent survive 15 years or more.” Running a successful business is hard. Really hard. Being an absentee owner makes that even much more difficult. In 30 plus years as Gwinnett CPA serving Atlanta Business owners I have seen hundreds to thousands of businesses fail for lack of attention and direction and I have only witnessed one. Only one succeed when there was an absentee owner.
5. Be Diligent. Knowing the past successes of the bsuiness you are buying as well as an objective assessment of their weaknesses will do much to help get you started off on the right foot. Reviewing the existing contracts and present business plan of the company you are considering buying are essential. A bank will want for new start-up businesses to have a business plan before making a commitment. Accordingly I believe it ever more so to have developed your own business plan for your new business purchase to personally assess and consider present business operations and their viability of your short and long term business plans
The below link is a Due Diligence Checklist/Worksheet for Business Acquisitions http://www.hiscpa.com/business-checklist.html
Duluth/Gwinnett CPA: New Business Checklist for Atlanta Entrepreneurs http://www.hiscpa.com/article7.html
Atlanta CPA Encourages Gwinnett Business Owners to Excellence http://www.hiscpa.com/achieving-excellence.html
Gwinnett CPA: Checklist for Atlanta Business Owners http://www.hiscpa.com/business-checklist.html