There are always concerns and reservations when buying a business. Particularly, there's the question of "What if I make a bad decision while going through the process or moving forward after the transaction." Every industry is going to have its own set of pitfalls that you want to avoid.
Here are a few things that you should NOT do when you're going to be buying a business:
Set Up an Equal
Business owners often share the start-up responsibilities with
a partner or partners. However, sharing 50-50 or by thirds or quarters is a big
mistake. Conflicts will always arise down the road, and you will need someone in a
controlling position to make a final decision. Choose a CEO (someone with
experience and skills needed for success) and give that person a greater
decision-making authority and a bigger salary, even if it is only bigger by a
People and Planning
You need to become a strong manager when the business
starts to move forward. Many fail because the people in charge don’t have the managerial
qualities or strengths to cope with the challenges that come with buying and running a business. Additionally, stress can put
a strain on personal relationships and make the challenges harder to deal with.
Personality assessments can determine if you’re cut out for a managerial
position, and training can prepare you for the new rule as an executive.
Without proper market research and a solid plan, a business
is more likely to fail. The more preparation that you do, the better the
chances that you have to succeed.
Relying Too Heavily
on Fewer Customers
Having too few customers makes your business vulnerable. It ties your future to the decision of other organizations. If their
business falters, it puts your hard work and dedication at risk – through no
fault of your own.
Therefore, having scores of customers, even though none of them are gigantic, is a smarter move in the long term.
Insufficient Financing Can Cause Cash Flow
While some people are successful at jump-starting their own
enterprise with little or no outside investment, they do so by being fortunate,
modest in their spending and by plowing profits back into the business.
The majority of businesses, however, don’t deliver the
projected first-year sales volume. It’s better to overestimate your need for
capital resources at the beginning and to underestimate your projected sales
figures. It’s better to be pleasantly surprised at your success than to lose the
business and your house because the money isn’t there when it’s needed.
When contemplating an expansion of your business, be wary of
spiraling costs. If you’re in a cyclical business, or one vulnerable to
recession, be sure to be very calculating about your expenses and develop a
Plan B well before you need to implement it.
Failing to Admit
Business owners are sometimes the last to admit that their
idea doesn't have the spark that it once had. Having advisers that you can trust is
important. Cut your losses and move on if your advisers all agree that you should.
This may save the company if you can move quickly enough to capitalize on your
mistakes, or shift the product or service to take advantage of other
Your competition won’t stand still for long, once you’ve
demonstrated their weakness in the marketplace with your product or service.
Expect them to plug the hole quickly and even try to outflank you in the
process. Your business and marketing plans should anticipate how to deal with
new initiatives from your competition. If you conduct ongoing research, product
and service evaluations and marketing campaigns, you should always be one step
ahead of the competition.