I’ve seen some very smart people make some very dumb mistakes when buying a business.
Why?
Because buying a business is different from buying almost anything else.
Here are 10 mistakes I see.
1. Falling in Love With the Business
If you become emotionally attached before you understand the numbers, you’ve already weakened your negotiating position.
2. Buying a Job
If the owner works 70 hours a week, don’t assume you’re buying an investment.
You may be buying a 70-hour-a-week job.
3. Buying an Industry Instead of a Business
“I’ve always wanted to own a restaurant.”
Fine.
But the question is whether this restaurant makes sense.
4. Overestimating Your Skills
Being a great executive doesn’t automatically make you a great restaurant operator.
Be honest about your strengths and weaknesses.
5. Ignoring Working Capital
The purchase price isn’t the only money you’ll need.
You need cash to operate the business after closing.
6. Believing the Asking Price Is the Value
It’s not.
The seller picked the asking price.
You need to determine what the business is actually worth.
7. Skipping Professional Advisors
A CPA and transactional attorney aren’t expenses to eliminate.
They’re part of the acquisition team.
8. Ignoring the Lease
A great business with a terrible lease can become a terrible investment.
9. Negotiating Only on Price
Terms matter.
Seller financing, transition periods, inventory, working capital and contingencies can materially change the economics.
10. Failing to Walk Away
Sometimes the best deal you make is the one you don’t make.
I’ve written extensively about building the right acquisition team and process in my [How to Buy a Business in Florida] series. How to Buy a Business in Florida
Michael Shea represents the Tampa Florida Transworld office. In business since 2005, he has established a reputation as a trusted business broker across Florida’s key markets- from Tampa to Orlando, Melbourne, and more. Over the past two decades, Michael and his team have closed over $1 Billion in sold business volume and presided over more than 476 transactions. His credentials include the IBBA Certified Business Intermediary®, and most recently, the prestigious Certified Exit Planning Advisor® (CEPA) credential. He is also a Florida Licensed Real Estate Broker and Business Brokers of Florida Board Certified Intermediary . Shea is a member of the VRMA and a recognized expert in property management and vacation rental management business sales