3 Mistakes to Avoid when Buying a Small Business in Connecticut
If you are considering purchasing a small business, you may understandably be experiencing a mix of excitement and apprehension. Being a small business owner can have tremendous personal and financial rewards, but the decision to purchase a business is not one to take lightly. It is very important to take your time and not rush this major endeavor. Thoroughly research your options and speak with a qualified business law attorney to ensure that your purchase goes as smoothly as possible. As you start the business purchase process, make sure to avoid the following common mistakes.
Not Asking Why the Business Is for Sale
The prospect of being a business owner, especially a first-time business owner, is an exhilarating idea for most entrepreneurs. Unfortunately, this enthusiasm can sometimes cause potential business owners to make hasty mistakes. One of the most common errors people make with regard to business purchases is not understanding why the business is for sale in the first place. Make sure you have a detailed conversation with the business owner about his or her incentives for selling the business. Business owners may not always be 100 percent honest about their reasons for putting the business up for sale, so you may also need to look for subtle clues that reveal the real motivation for the sale.
Inadequate Due Diligence
Do not expect the process of finding the right business to purchase to be a quick procedure. You may look into several businesses before you find the right fit for your particular goals. Proper due diligence is crucial to successful business investment. Thoroughly investigate the business from a legal and financial perspective before you begin negotiations with the owner. Learn about what assets the company owns, discuss any business debts or liabilities, and find out if there are any liens on the business. Investigate documents related to any ongoing or potential future lawsuits as well. An experienced business law attorney can be a beneficial resource during this investigation.
Overvaluing the Business
Business valuation is a complex, multifaceted process that should be conducted cautiously. It is always best to be conservative when you are estimating future cash flows. Be careful not to underestimate future capital expenses such as maintenance, investments, and equipment as well. Furthermore, do not assume that the business will remain exactly the same after you purchase it. Ideally, the business will be even more successful after you take ownership of it, but either way, the company will likely change in some form. The value of the business changes the moment the purchase is made.
Contact a Fairfield County Business Purchase Lawyer
The purchase of a business may be one of the biggest financial and legal commitments you ever make. It is crucial that potential small business owners investigate their options, conduct proper due diligence, and carefully value any business they are thinking of buying. Most importantly, obtain sound legal guidance from an experienced Stamford, CT business law attorney. To schedule a free and confidential consultation at The Law Offices of Peter V. Lathouris, LLC, call us today.