Considerations When Buying a Business Should Include Location and Profitability Among Others
The decision to purchase a business is one that should not be taken lightly. There are many considerations when buying a business and you should not rush into a purchase until you have thoroughly done your research. If you have begun looking for a business to buy, you need to consider these important factors.
If you are buying a brick and mortar business you want to be sure it has a good location. It should be located near where you live, but also, it needs to be in a place where it will get the most business. If the business has a storefront, research the area to find out how much traffic there is, both on foot and by car. Visit the area and also make note of parking options, transportation, and whether it is in an area that attracts visitors.
Before you make a decision about a business, you need to review its cash flow. The profitability of the business will show you quite a bit about how it is doing. Determine whether there is enough profit coming in monthly to pay the overhead expenses as well as your salary. After all, you don’t want to work for free. You also need to consider the trend over the last 5 years. If the company is on a downhill slide it could be headed for bankruptcy. It is a mistake to think that you will be able to turn around a failing business.
Find out the selling price of the business. Remember that this may be a starting point and could be negotiated. Keep in mind that along with the purchase price you will also have to begin making payments to vendors, suppliers, employees, landlords, and any other payments that may not be immediately known. Have an experienced business attorney review the company’s books to determine the real costs that will be necessary.
Type of Business
It is often best to try to purchase a business in an industry in which you already have experience. However, it is important to realize that not all types of businesses are on an upward trend. It is also essential to research the laws governing the type of business ahead of time to make sure that your business will not be negatively impacted. Read information online and gather data through a variety of sources before making a final decision. Make sure that you have a knowledgeable attorney create and execute a contract that protects you in the purchase.
This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice regarding Considerations When Buying a Business, or any other litigation matter, please feel free to contact Stockton D. Banfield at 480.461.5356, log on to udallshumway.com, or contact an attorney in your area. Udall Shumway PLC is located in Mesa, Arizona and is a full service law firm. We assist Individuals, families, businesses, schools and municipalities in Mesa and the Phoenix/East Valley.