Mistakes to avoid during business acquisition

Business owners are essential to a healthy economy. However, entrepreneurs face a significant amount of risk. According to LendingTree, almost twenty percent of all businesses fail in their first year.

If you want to acquire a business, you must avoid the mistakes described below. Running a business is difficult enough. Do not complicate things with preventable errors.

Neglecting the owner’s finances and credit

You might never get the whole truth out of an owner selling his business. You can look up helpful information and speak with the seller outside negotiations. It is good to look up the owner’s credit rating and the Better Business Bureau rating. Understanding the financial situation of the selling owner might help you get a better deal or prepare for competition in the future.

Using your name to purchase

In most cases, buying a business using your name is a mistake. If you do not have an LLC or incorporated company, start one before making a business transaction. Using your name creates liability and opens you up to lawsuits and personal responsibility, which does not help your business in the long run.

Forgetting the customer base

You cannot measure goodwill, but most small businesses rely on their reputation with their customers. When you purchase a company, you also buy access to their customers. However, you can lose the goodwill of your customers if you do not understand who they are and what they want.

Though business valuation and acquisition involve real numbers, many intangible factors also exist. A successful business purchase requires you to understand both the quantifiable and relational aspects of running a successful operation.