Are These The 3 Biggest Mistakes When Buying A Business?

3 biggest mistakes when buying a business

Ignore these three areas when buying or investing in a business and you could be in for a bumpy ride.

There are a multitude of variables that need consideration when buying or investing into a business. Here we cover three of the fundamental areas that should be given preferential thought.

Buying the wrong business for you

Recently I walked into an instrument shop to buy a piano for my youngest. She recently won a school competition and her current keyboard was great for entry level. Her skills and ability were improving quickly and to motivate her further a new piano was in order.

What was striking when we went to buy the piano was the store owners’ passion and his depth of knowledge. With a wide selection of pianos ranging from £2,000 to £20,000 there was no way I would have brought from him if didn’t know what he was talking about. He actually spent over an hour with us without obligation and demonstrated the pianos and his own abilities which were all necessary to give him credibility and give us a feel of the standard that could be achieved.

We all have transferrable skills and with some training and dedication we can adapt to new businesses. But being realistic about your own desires and passion for the business you are adopting is very important for the success of that business.

Due Diligence

“Due diligence” is a great phrase but the problem with it is that it covers such a wide spectrum that it can mean anything. When seeking to invest in a business you want to get under the skin and truly understand what makes it tick. You will also want to uncover the underlying risks. You will be dealing with the seller and their agents who will be painting the business in the best possible light.

Going through a bespoke due diligence plan is the only way to ask the right questions for that business. Financials play a big part in any due diligence work and all too often the figures are taken at face value. Our advice is to go deep, in fact go in as deep as you can. Underneath the surface you will find many things which must be evaluated and considered to help you come to an informed decision as is the aim.

Company image and culture

The culture of the business and its employees has a massive impact on the success of the business. Organisational culture isn’t something you will find documented in any business buying pack. Take for example, if you are buying a restaurant, how are you going to know if the waiters are rude? If they are, is it just an individual trait or is it an intrinsic part of the culture due to a lack of training perhaps?

A prime example came to us in recent months of an otherwise successful business that had to close its doors due to a manager making false claims to their governing body. Our client, ultimately fed up with the staff culture she inherited, felt it easier to close the doors and then deal with the situation. Such examples show that it is imperative to familiarise yourself with the current working culture of any business before taking a decision.

If you get these three areas covered then you will be well on the way to doing business the right way. You will be energised to perform and to lead your business from the front with confidence.


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