Buying an existing business can have its advantages. If the business already has a loyal fanbase, you could potentially have plenty of customers, which makes it easier to ensure continued success. However, there are some mistakes that people tend to make when buying businesses that puts future success in jeopardy. Below, the Benkabbou Law Firm describes some of the common legal rookie mistakes that people make when buying a business and what you can do to avoid making them.
1. Not Being Aware of the Reason(s) for the Sale
Always find out the reason for the sale of a business. Some entrepreneurs start businesses and move on from them quickly because they are always looking for a new, profitable venture. Just because someone is selling a business, it does not mean that the business is not doing well. Some business owners choose to sell at the right time when they can make a decent amount from the sale while stepping away from the industry for personal reasons. However, there are times when business owners are looking to sell because they are unable to achieve success with the business. In order to make an informed decision, you need to know this information in advance.
2. Not Reviewing the Contract Before Signing
The sales contract between you and the original business owner is a BIG deal. If you do not read through it and have any legal jargon translated into simpler terms before signing, you could make some major EXPENSIVE mistakes. Always make sure that you have a good understanding of what the contract entails before you sign it. You should have a business lawyer carefully review all the details of the contract before moving forward.
3. Not Having a Plan for the Business
Before you buy a business, you should have a plan for it. If you know what the business is about and who the targeted audience is in general, you should be able to come up with some unique and fresh ideas that could help you take the business to the next level. If you do not have a plan and you just jump into the purchase anyway, you could run into a lot of trouble, including coming across unexpected legal issues.
4. Failing to Seek Legal Advice Before Making the Transaction
Not getting legal advice when making such a major transaction is one of the worst things you could possibly do. You need to speak with an attorney about your intentions of purchasing the business. An attorney can help you make the decision to invest in the business based on different factors, including the potential legal liabilities of the business, the value of the business, and more. Your attorney will help you review financial documents, contracts, governing documents, etc. for the business to let you know if you are making a wise investment or not. Your attorney will also ensure that the purchase will not violate any antitrust laws as these laws can be implicated in some business acquisitions.
5. Investing in a Business That You are Not Passionate About
If you are not passionate about a business and what it sells, you should not invest in it. You need to have a true passion for the product or service that is provided to the customers. If it is not something you love or believe in, you are going to have a difficult time staying motivated to keep things running during the pitfall of the entrepreneurship journey.
Thinking of Buying a Business? Get Expert Legal Advice Ahead of Time
When you are thinking about buying a business, make sure to get legal expert advice beforehand. At the Benkabbou Law Firm, we are prepared to help you make an informed decision about your investment. Your best interests are important to us. Reach out for a consultation by calling us at 813-586-3351 or emailing us at consult@blawfirmpllc.com.