I often encounter clients who are distracted by the excitement of purchasing businesses and the selling process. They are too focused on completing the transaction that they do not bother to research the essential details of the business they plan to purchase. Buyers who are new make a lot of mistakes prior to buying the company and then after purchasing it. I’ve identified eight mistakes that are common among new buyers. The most common mistakes made by buyers when purchasing a business are like this:
1. Examining the Business Yourself
Don’t attempt to complete everything by yourself. Ask for help. Get a professional to help. This is particularly beneficial for those who aren’t familiar with the field you’re thinking of entering. They can offer professional advice about the industry and help you fill with information about what you’re getting into. This is a valuable piece of data that only financials cannot give.
2. Don’t Be astonished by everything you hear
Brokers and owners attempt to convince you about the business, and you must not trust everything they say. They will give you all of the positive things you’d like to hear. A consultant or industry expert can reveal things that the broker or owner failed to address that could have cost you money at some point in the near future. This is especially useful in relation to the purchase of equipment. Replacement of outdated equipment is an expensive expense for any business. Being aware of all the details in the open, both good and negative, will help negotiate the price for sale.
3. Assuming That Their Customers Will Be Your Customers
Customers might have been loyal to the previous owner; however, that doesn’t mean they’ll be committed to the business you run. If you can, do your best to maintain your current customers. Some customers might leave at first and then return later when they are not happy with the changes happening. Prepare to lose some clients, but be prepared to win new ones. Make sure you are focusing on the marketing effort. New customers can assist in compensating for any loss of revenue.
4. Making Changes
People are generally not a fan of changes. Do not make several changes right away following the acquisition. Begin to ease into the company and become familiar with the staff and customers prior to implementing any modifications.
5. Making it Personal
It is not advised to sell under your own name. This can make you personally accountable. It is important to safeguard your personal assets in the event that the business suffers from a difficult time or if an accident occurs. Ask your accountant or lawyer to determine the right company structure for you and what is the best way to protect yourself from personal liability.
6. Corporate Culture
Every company has a certain culture. Changes to the culture could cause a lot of upset clients and staff. For example, don’t try to transform an established family-run business into an established corporate structure. The culture of the company is an important aspect of any business and cannot be overlooked.
7. This is known as the Internal Social Network
Every business has a social network, or the employees in a group are acquaintances. They typically include a leader who has an impact on the morale as well as the views of others. The person who is in charge could be the difference between success and failure for your company. Positive environments can eventually spread to customers. Ask your current manager what the top social influencers are. Spend some time learning about them and urging them on the bandwagon.
Running your own business has the benefit of setting your own hours. One mistake that many people make is not being available. Make sure you are present for the first time. Spend time with the team. Share your ideas. Let your employees know the person you really are as well as how you would like things to be done.
There are a lot of common mistakes that you could make when purchasing a business; however, keep these eight tips handy for avoiding these, and you’ll be off to a successful beginning!