Things to Consider When Buying a Small Business: Saving Money and Checking Cash Flow

You have numerous things to consider when buying a small business, even though buying an existing business has considerable opportunity. In the present, you’re ultimately saving money not having to start a small business from scratch, especially when a building already exists. The only thing you have to worry about is the future. And what those possible issues are can be scoped out by looking at the existing business’s past.

Cash Flow Issues

Study the financial past of the small business you’re buying and make sure they’ve maintained consistent cash flow. If they have, it means they don’t have lingering debts that could haunt you down the road once you start pulling in profit. Sometimes those debts can be hidden, so be sure to do a thorough financial investigation.

If you find out cash flow was consistent, it helps paint a slightly better picture about your next worry: A consistent customer base.

Customers

While your new ideas for the business could mean having to build a partial new base of customers, a business that already has established customers always helps. It saves you having to start from the very beginning in convincing someone to buy one of your products. You can easily work with existing customers and convince them that they’ll still get the same level of customer service and products as before. Nevertheless, assure them that their prior customer service experience will be even better under your ownership.

Business Equipment and Inventory

Does the existing business you’re buying already have up-to-date equipment? If it’s outdated or in need of repairs, you’ll have to consider that as much of an expense as it would be starting the business from the ground up. Do a thorough check of all the business equipment to make sure it’s in good working order. This includes the business computers that are used in the back offices.

As well, look at the business’s inventory to see if you can still sell existing items still on the shelves. Using what’s already there will save you considerable money, as long as it’s products that can last for years and not perishable items.

Working Out the Lease

If you’re going to be renting out space to continue the business, you’re going to have to work out the existing lease. You’ll need to come to an agreement with the landlord on either continuing the previous lease or creating a new one. Should there be any disagreements, you may have to take the business to another location. When that happens, location can be a huge issue on its own.

Once the lease is secure, you’ll also need to obtain all your permits and licenses. In Massachusetts, you can acquire them by contacting the city. However, you may need more licensing, and you can acquire those through the Massachusetts Municipal Association or Commonwealth Communities.

You may also need an experienced business lawyer to help you through the analysis and acquisition of buying a new business. We encourage you to call us with any questions and to obtain the guidence you need to make a good business decision and start your new business of right.