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2 critical considerations before buying an established company

For some time, California entrepreneurs were hesitant to purchase and develop an existing company. Many feared their efforts would be seen as less inspired than those who create businesses from scratch.

Now, more business-minded individuals are open to buying a business that has already been proven. With dedication and work, it is often possible to elevate an existing company to new heights and perhaps greater profits.

Before you rush out and buy such a business, it is vital to consider the factors below carefully.

Reason for selling

Perhaps the current owner merely wants to retire and lacks an heir or suitable person to assume ownership. On the other hand, there could be a financial or legal obstacle waiting on the horizon. For example, if the current owner is seriously in arrears on their business debts, they may be selling to get out from under them.

When a seemingly prosperous business is for sale, always investigate to identify potential problems. Otherwise, you could end up buying trouble as well as a business.

Potential for growth

Under smart leadership, some businesses can grow unchecked until they reach “big business” status. However, others may reach a peak and grow no further despite efforts to increase sales and attract more consumers. For example, companies bound by seasonal interest or market saturation may have trouble sustaining continued growth.

If one of your goals is to expand company sales substantially, look for possible challenges affecting growth capacity. Weighing the rewards against the risks is critical in any business transaction. When large sums are involved, it is usually even more important to perform your due diligence.