What to Do if You’re Thinking of Buying a Business

Buying an existing business is a huge decision for most people. Many people like the idea of buying a functioning business because they’re essentially skipping the “startup” phase.  If you’re considering purchasing a business, here are a few things to think about before taking the leap.

Find out why the business is on the market

An entrepreneur may have many reasons to sell their business. They may be ready to retire or relocate, they may have pressing health or family concerns, they may also have other professional ventures or projects that need more attention. However, in some cases the company may be losing money or may have an unsustainable operational model – these factors may make the business less appealing to buyers. It’s not always possible to get a straightforward answer from the seller, so you may want to conduct due diligence before moving ahead with a sale. While the business’ financials are the major concern, you may also want to look at the company’s reputation, customer reviews, and operational processes.

Understand the industry

To run a business successfully, you need a certain amount of industry knowledge. This isn’t to say you need to be an expert, but acquiring a business in an industry you’re unfamiliar with could mean a steep learning curve. For instance, if you’re interested in buying a restaurant you may need to know about the food and beverage industry in general, including food safety regulations, liquor licenses, the local dining and delivery scene, the cost of ingredients, what locals are willing to spend on restaurant meals. If you don’t have firsthand knowledge or experience, you can explore other options such as hiring a suitably experienced CEO or getting help from an external consultant.

Consider life insurance

Life insurance can have some clear benefits for business owners. If your business partner takes out a life insurance policy on you and you pass away, the insurance payout can enable them to buy your share of the business from your family. You can also borrow against the cash value of a permanent life insurance policy such as whole life insurance or universal life insurance when your business needs some additional funding for a new opportunity or unexpected costs. You might decide to take out an additional life insurance policy to benefit your family, to ensure financial security should you pass away.

The primary purpose of permanent life insurance is to provide a death benefit. Using permanent life insurance accumulated value to supplement retirement income will reduce the death benefit and may affect other aspects of the policy.

Source: iQuanti