An entrepreneur with experience will always tell you the importance of doing your due diligence if you are thinking about purchasing a business. However purchasing a business is not always easy. I can be a long difficult process that will need you to inspect, investigate and interview all aspects of the business, employees, finances and location.
If you are already doing so you should work with a business broker. Not having a broker will make the vetting process longer and harder. A broker can offer you experience because they been through the valuation process before. This can help to choose if a business is a good investment or not.
How can you learn about a business by yourself?
The Better business Bureau (BBB) is the industry watchdog. If a business has been accredited by the BBB then it has met their standards. The BBB is also there to help resolve complaints from customers. If a business is accredited by the BBB it must pay fees to be monitored and reviewed, these fees go to supporting the BBB and their services. However, the BBB is not an absolute guarantee that the company is competent or even viable.
It can be easy to find information about a business that is for sale. You can simply look at the listing for the business and get the information to contact the owner. There are usually links to pdf files or websites that offer more information. Some others will give you direct contact to their broker. Remember that collecting information will not only be looking at finances. However a financial review is highly important, the business’ success is more than just numbers on a piece of paper.
Why is gathering information important in the evaluation?
You can identify the weaknesses, strengths, and opportunities for growth, problems and anything else that could keep you from acquiring the business. You might learn how the owner of the company feels about selling his company and why he is selling. Missing out on any important detail at this stage could be a big mistake.
Some statistics have mentioned that 90% of people who look at business listings are looking for a new business never complete the process. The 90% is mostly due to a lack of proper information about the business listed. Therefore if you do not have enough information collected from a directory of listings you will not know what the next steps are. Therefore if you lack the time you need to do the research you should consider hiring a business broker who can do the work for you.