Buying an existing business instead of starting a company from scratch has several advantages, which include a reduced share of risk combined with lucrative opportunities. However, the decision to purchase an existing business also requires attention to detail.
Read on to find the questions to ask when buying a business in Florida.
What Questions to Ask When Buying a Business in Florida – In Detail
What is the Reason that Led the Current Owner to Sell the Company?
The first step to identifying whether purchasing a certain company is a good opportunity is to discover the reason the owner is selling it. As expected, an owner selling a company based on negative factors such as low profitability will not likely reveal it.
However, it is fundamental for a prospective buyer to ask the question and get a sense of whether the seller is not comfortable talking about specific topics. Not identifying a legitimate reason that justifies the business sale immediately raises red flags.
Is the Seller Willing to Participate in the Business Financing?
In several cases, it is normal that a seller may not want to participate in the financing process when selling a business in Florida. While this is not necessarily a requirement for a good transaction, it is a strong indication that both parties have confidence in the future of the company.
The presence of an old owner during the process of transition is also important to ensure smoother, gradual changes that will not affect the business operation negatively. If a seller is too anxious to get away from the business, it can indicate a red flag.
What Method Was Used to Determine the Selling Price for the Business?
It is not uncommon to find business owners who do not rely on solid pricing methods to determine the fair market value of a company being sold. Instead, many sellers might not get involved with stats and numbers and have an approach similar to “wishful thinking.”
Whether the business has been valued by its owner or a professional firm, the process must meet basic requirements in terms of professionalism and realistic precision. It is fundamental to consider the real value of all assets involved in the transaction, including intellectual property, inventory, equipment, etc.
Elements like revenue, the annual volume of sales, cash flow, and payroll are some of the basic topics that must go through in-depth analysis.
Will the Business Function Without the Current Owner?
Whether a business runs solely based on its owner’s unique skills, networking, or charisma, the company simply becomes overdependent on a single person.
Many companies depend a lot on the owner’s personal attention to survive, which is not a positive factor for prospective business buyers. Will the business run properly with a new owner? Is the company an independent mechanism? These questions must be answered timely.
A good way to identify this element is to discover the last time the current owner went on vacation and how long he or she spend out of the company. Companies that require their owners to be working non-stop do not offer good business prospects.
Are You Interested in Buying a Business in Florida? – Immediately Seek Expert Legal Guidance
A well-versed legal advisor with a long list of successful entrepreneurial cases, Attorney Romy B. Jurado is willing to help you succeed. Contact us by calling (305) 921-0976 or emailing Romy@juradolawfirm.com to schedule a consultation.