Weekly Business Insights from Top Ten Business Magazines | Week 316 | Entrepreneurship Section | 2

Extractive summaries and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Since September 2017 | Week 316 | September 29-October 5, 2023

5 Important Factors Novice Entrepreneurs Must Consider Before Buying a Business

By Pierre Raymond | Entrepreneur Magazine | October 4, 2023

Extractive Summary of the Article | Listen

It’s not completely novel for new entrepreneurs to side with a business partner or purchase a sizeable stake in a company, hoping to transform it into an empire; it’s best to first address some of the unspoken rules of the game and to understand what you’re getting yourself into before you can sign on the dotted line and claim your corner office.

Business objectives.  As someone who might be fairly new to the business of buying a business, it’s best to consider and understand your business objectives before anything else. Consider the bigger picture — not just of the business you have in mind, but the type of leader you will need to become and how you will operate your newly purchased business. 

The industry.  Buying any business is not only about understanding the ins and outs of day-to-day activities, but learning the industry in which this business may operate.  Learning the industry will give you some clarity as to why an owner might be looking to sell their stake in the company. You might stumble across untapped opportunities or even realize that industry conditions are steadily on a downward trajectory.  More importantly, learning about the industry also allows you to learn more about the people you are likely to be working with.

Finances.  Business ownership comes with a lot of consideration of finances, and as a newcomer, you will need to learn the ropes of how to assess the financial condition of a business before you can make an offer.  Understanding the financial history should be one of your top priorities. Learning how the business operates, where the majority of its revenue streams may be, how much debt it may be carrying and how income is distributed among all channels of the business will help a better picture of the overall health of the business. 

Future opportunities.  As an entrepreneur, buying an existing business requires you to plan for the future, not only in terms of financial prosperity but also to ensure that as the consumer landscape begins to change, your new business can adjust to these developments.  Although you may only look at the current pace at which the business has grown over the last few years, consider how the coming years will influence the business objectives and how innovative decision-making can lead to new ideas and opportunities.

The underbelly.  Finally, as part of buying an existing business, ask yourself “why.” You may want to repeat this question several times before you can get the answer you’re looking for.  Ask yourself why current owners might be selling the business, and what are some of the reasons they have shared with you and other prospective buyers. You can even ask yourself why you are considering buying this business and what your long-term objectives are.  Get to know the underbelly of the business, and seek out any unknown skeletons that might be hiding in the closet. The more you know about the business and the overarching “why” factor, the better picture you can paint for yourself before making an offer.

2 key takeaways from the article

1. It’s not completely novel for new entrepreneurs to side with a business partner or purchase a sizeable stake in a company, hoping to transform it into an empire; it’s best to first address some of the unspoken rules of the game and to understand what you’re getting yourself into before you can sign on the dotted line and claim your corner office.
2. You need to consider the following 5 factors before you can consider buying a running business:  It’s best to consider and understand your business objectives before; learn the industry in which this business may operate; consider how the coming years will influence the business objectives and how innovative decision-making can lead to new ideas and opportunities; and try to know the underbelly of the business, and seek out any unknown skeletons that might be hiding in the closet.

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Topics:  Entrepreneurship, Startup, Decision-making