Going into business for yourself is one of the most exciting steps you can take. The right business is something you will be passionate about that will provide the income to live the lifestyle you want to have. Along the way, however, there is a lot of hard work to buying a business. This is particularly true in the startup phase. 
You can bypass much of the struggles startups go through by purchasing an existing business. If you can get into a business that is already making money for example, then you can go straight to the “passion” and “lifestyle” phase. But this is much easier said than done. There are countless businesses out there for sale, and there are several traps you need to steer clear of to avoid ending up buying the wrong one.
Here are five of the most common pitfalls buyers fall into when looking for a business to purchase:
Not Taking the Time Necessary to Find the Right Business: Searching for a business to buy is not unlike searching for a new home. There are typically several available in the marketplace that match your minimum criteria, and from there, you can hone the choices down to the top two or three. During this process, some buyers tend to get emotional and want to jump at the first or second listing they look at. This is often a big mistake. Buying a business should be a methodical process. Take your time and look at all your options before you dive in.
Failure to Perform Due Diligence: At a very minimum, the seller should provide you a detailed financial report once you have shown serious interest in the business, signed a non-disclosure agreement, etc. But this will not tell you the whole story. In fact, this report will likely be framed to put the business in the best possible light. In addition to the financial report, you need to do your own research. Find out about the market you are entering, the competition you face, the state of the industry as a whole, and perhaps most importantly, why the owner is selling.
Not Having a Well-Defined Non-Compete Agreement: When you become the new owner of an established business, the last thing you need is the existing owner (who is a seasoned veteran in the industry) starting a competing firm. Insist on a non-compete agreement that defines specifically the type of business and the geographic area the owner is prohibited from working in, and the length of time the agreement will be in effect.
Being Unrealistic about their Knowledge and Skills: When you look at becoming the new owner of a business, you need to consider what that will look like when the current owner is out and you take his/her place. More specifically, what is the current owner’s role in the business, and how does that contribute to its success? Next question, do you have what it takes to perform this role at least as well as the current owner? For example, if the current owner is a great salesperson that has developed strong relationships with clients, can you step in and do the same thing? Be realistic in the assessment of your skillset, this alone could determine whether or not you should consider this particular business.
Not Working with a Professional: The business purchase process is highly complex, and there are many aspects of it that most people are not familiar with. This is where the skills and experience of a business broker can become a lifesaver. A reputable business intermediary not only has access to the most extensive listings of businesses for sale, they also have in-depth knowledge of the complexities of the process and what it takes to ensure a smooth and successful transaction.
