6 Factors to Consider Before Buying an Established Business - Matus Law  Group

Buying a start-up business is an interesting and maybe even attractive way to start in the business world. An ongoing business can be sold for several reasons, according to luminablog.

There are many things to consider:

  1. The history of successes and failures that the company has had
  2. The story behind the product. Small business mortgage loans should also be checked
  3. Try to understand the “real” reasons why the entrepreneur sells the company. They are not always what he manifests.
  4. Its position in terms of competition, competitiveness, exclusivity, and validity of the need that the product satisfies.

The importance of financial statements

Of course, financial statements can be very helpful in better understanding the company; But remember that they cannot always be trusted, even when they are certified or audited by a certified public accountant. You should have assurance from the current owner that you are receiving “managerial” financial statements. Of course, a qualified financier or consultant will determine with relative ease whether the financial statements and other information are consistent.

Improve your ability to control your business finances

Know and learn how to use practical and effective management control tools to make better decisions and increase profits in your company.

Making better decisions depends on the quality of the information you use and to improve the business you need to control the results. What is not controlled is not improved and to control you need to have management control tools.

Value analysis is essential for acquiring the company

One of the first steps in defining the acquisition of a company is to evaluate its value from a financial point of view. For Daniel Oliveira of Master Minds (a financial solutions company), the success of an organization can be difficult to measure. “There are several critical points that influence the success of an operation and, consequently, that of the evaluated company,” he warns.

Because this analysis must take into account growth projections and future risks, the task is often difficult. Among the points analyzed are:

  • Macroeconomic factors.
  • Market analysis criteria.
  • Methods of work organization.
  • Legal issues.
  • Accounting, tax, and financial elements.

What to consider before buying a company

In general, only professionals – accountants and administrators – can prepare for reduced cash flows. If such a name doesn’t seem to say much and you prefer to look at the company from a more practical standpoint, make sure you keep a few details in mind:

The reason for the sale

Knowing exactly what motivates the entrepreneur to sell their business is an important criterion before deciding to buy the company. Problems of continuity of management or imminent retirement are positive signs because theoretically, they do not hide other reasons. Be perceptive to find out if the entrepreneur does not want to give up the business.

Full operation

When an organization saves even the coffee of officials, there is a clear indication that the budget is out of control and the running of the business will be a chore. Find out if the critical processes for the operation work smoothly, without industries being paralyzed due to drastic budget cuts. After all, the idea is to buy a financially sound company.

Market situation

Investing in a company with a declining market is not a good idea unless there are projections for a resumption shortly. Find out if there is a demand for the company’s product in the region in which it operates – and also analyze the competition – before deciding to buy the company.