I have been looking for an existing business to buy and may...

I have been looking for an existing business to buy and may have found one. How do I know if it’s a good investment or not?

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A lot of prospective business owners get caught in the moment when they decide to buy a business, and they don’t always ask the right questions or do enough research.

Understanding the sale

The very first question you should be asking the seller is why are they selling the business? Don’t assume the business is being sold in a growth phase, or even accept such an assertion at face value.

Very few people sell businesses while they are making good profits. Make sure you aren’t about to buy a hot potato that is losing money.

  • Is the business up to date with SARS?
  • Are their any hidden debts?
  • What profits are being made?
  • Is anything about to change in the local industry’s landscape or regulations that you need to know about?

Dot your Is and cross your Ts

Always ask for all of the business’s financials and reconcile the numbers yourself. Make sure you can see how much money had been coming into the business, and how much has been going out.

If you aren’t sure of the numbers, work on your own financial acumen before you decide to buy a business.

Next, seek legal advice. This is an added expense, but before you sign a contract or hand over your retirement savings, make sure the sale is completely legal and above board. Firm, well structured contracts ensure everyone is on the same page.