And why is it sold?
One of the first questions that a buyer of a business asks his broker is "and why is it being sold?" However, today, to row against the current a bit, I will present to you what I believe are the 4 most common underlying reasons for not buying a business.
1. The company is not ready for sale.
The owner of the company experiences losses and wants to sell but has not prepared for that moment. Consequently, he has not kept his accounting and administrative books in accordance with universally accepted standards; he has not kept his equipment and business assets in good working order; has not paid taxes and other fees to public entities; It owes significant amounts to suppliers.
This careless scenario is an obvious turn off for any potential buyers who show up.
2. Obsolescence seized the businessman "moved from the base."
The owner has not been able to interpret the signs of change in the market in which he works. Cases such as video and CD sales; photo developing shops; printing of newspapers, maps, encyclopedias, dictionaries and telephone books; fixed telephone lines, long distance telephony and public telephony; and sales of fax machines, have left more than one unsuspecting business owner in the lurch. In these cases it is difficult for any prospect to even present himself to evaluate a possibility of acquisition.
3. The bulk of the clientele speaks a language that the Buyer does not speak.
There are daring entrepreneurs who venture to acquire a business without knowing the cultural patterns of the clientele that they are inheriting from the previous administration. In these cases, the few who manage to prevail in this difficult environment do so at the cost of immense sacrifices that chronically drain a large amount of their emotional energy. It is not worth venturing into this type of company if there are other more reasonable alternatives.
4. The company depends heavily on one or a few people who dominate the «Know How».
The target business is doing well, showing excellent financial results and is being managed with good judgment. However, while doing the pre-purchase analysis we noticed that the technology or specialized knowledge required by the company is monopolized by one of the employees. This circumstance should turn on an alarm light since our future success could always depend on that person.
Before buying, therefore, we must assess whether there is availability in the market of individuals who can replace these key employees. The formula that many employers use to deal with this problem is to make the prospect sign a service contract or even incorporate him as a partner. In both cases, the ability of the owner to dispense with the services of that employee when he deems it convenient is hindered.
For all of the above, and to avoid unpleasant surprises when buying a company, it is essential to carry out the preliminary examination of the accounting books, the operating licenses, the market, the lease contract, legal actions ongoing or imminent, the status of customers and suppliers, among other reviews of interest.
It is common practice for Florida business brokers to monitor the different stages of the buying and selling process so that the transaction can be closed in a harmonious and balanced way for the parties.
And, although I usually trust people, when buying a business it is good to take into account this reflection of Napoleon Bonaparte: "In the business of life it is not faith that saves, but mistrust."
Author: Alfredo Gonzalez I http://www.negociosenflorida.com