Starting a business from the ground up can be appealing, but it is not the only option. Buying an existing business could be an appealing opportunity, as well. It can be less uncertain than starting from scratch, and it could be easier to secure financing from investors and banks.
That said, there are risks that come with buying a business. You might already know that you should review a company’s history and seek legal guidance before signing anything. But if you are thinking of buying a business in British Columbia, you should also avoid these less-obvious but costly pitfalls.
- Buying a business that you don’t understand – No matter how solid an opportunity may seem to be, it can fall flat if you do not understand the industry or type of business. If the model or market does not make sense or interest you, it might be more trouble than it’s worth. Consider businesses that align with your knowledge and interests so that you can be in a better position to operate it successfully.
- Dismissing the location – Potential buyers likely appreciate the importance of a business’s physical location. They might see that it’s close to their home and in a desirable area and assume that’s all that matters. However, you must also consider details like local ordinances, taxes and operational restrictions, which vary widely depending on location.
- Failing to consider potential (or lack of potential) – An existing business might come with customers, inventory and a reputation in the marketplace. Still, you must also evaluate potential opportunities and challenges. Is there space to grow? If there is intellectual property, how long will you have protection over it? Are there employees or partners with long-term contracts? These elements may seem secure now, but be sure you examine how long that security might last.
- Carrying on business as usual – Even if the business you buy is running smoothly, failing to address the change in ownership can be a missed opportunity. Employees, partners and customers often want to know what they can expect – whether that includes changes or not. And promoting the business as you see it can reinforce your role as the new owner.
These missteps can have costly repercussions that follow the enterprise and business owner well into the future. As such, acknowledging them and taking steps to avoid them can be critical.