Signs to Look for When Buying a Business

You hear about them all the time. Angel investors who put in an investment and help an entrepreneur build up a business that can then be sold off at a large profit, or the boot strapping young startup whose original office is in the basement or garage before cashing out for millions. While these stories certainly happen they are far from the norm, but there are many thousands of examples of a professional coming in to help an underperforming business, getting their value through the roof, and helping the original business owner (or taking over it themselves) to cash out for a major payday.

However, this isn’t something that every single person can do. There are many good reasons to consider hiring a specialist or consultant for this work. Whether you’re looking for the value and flip, or else wanting to maximize a business’s potential and keep that as your long lasting career, you need to have a sharp eye for a good deal and get the help of professionals who know how to help you make sure you’re putting your money in a good investment and not just setting yourself up for failure.

In order to succeed at knowing when to buy a business you must be able to:

  • Be able to accurately read balance sheets and understand cash flow, profit to debt ratio, and accuracy of long-term projections
  • Understand when a company is under performing and clearly see the opportunities to make quick fixes to turn it around
  • Avoid the pitfalls of companies that cannot be scaled or have inherently broken models even if the other signs look good
  • A tough as nails negotiating style without alienating the other party

Even if an individual has all these traits, if they aren’t used to how negotiations work in the cut throat world of business acquisitions, they will be at a severe disadvantage to the other party. This is where having help becomes a huge deal.

That being said, you need to make sure any help that you do hire is reliable, experienced, and dependable. This isn’t an arena for rookies to jump into, no matter how ambitious or excited they are. If you’re looking to make that next step to buying a profitable business for the long haul, or for a build and pay-off, you want an experienced business closer by your side!