Questions to Ask Before Buying a Business

Launching a business from scratch takes time and dedication, with no guarantee your idea will get off the ground. This uncertainty can be an excellent reason to buy a business instead.

The monetary investment could be approximately the same or even less, but with a proven business model already succeeding in today’s market. Even so, this decision is not one to make lightly.

A smart and profitable purchase is the result of asking the right questions at the right time. In this post, we’ll talk about some of the questions you should ask before making an offer to buy a business.

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What Will My Professional Team Look Like?

No one accomplishes great things alone, and that’s no different when it comes to buying a business. A team of knowledgeable experts will help to ensure your acquisition continues to flourish long after you become the proud new owner.

Getting in touch with an experienced commercial real estate agent is the first step. Often, their network can become your network, giving you automatic connections to every other professional you may need.

Overall, your team will consist of your agent, a lawyer, an accountant, your lender, and possibly a business broker. Together, you will create a solid foundation to make your acquisition a success.

Is commercial real estate investing right for you? The posts below will give you something to think about:

Has a Professional Reviewed the Financials?

Many business owners and professionals have a saying: “The numbers don’t lie. Unless they do.”

Unscrupulous sellers might try to hide weaknesses within the financial mumbo-jumbo, while even those with noble intentions may not provide all of the necessary details to allow you to make the best possible decisions. A qualified accountant can attest to the financial health and potential of a business before you buy it.

What Are My Financing Options?

Buying and owning a business can be financially rewarding, but there will be numerous upfront costs to be aware of. It’s not just the purchase price. You’ll also have monthly expenses, maintenance and repairs, taxes, as well as a host of start up costs before you can begin seeing a profit.

In other words, you’ll need financing. The Business Development Bank of Canada is a good place to begin exploring the possibilities. Just remember that business mortgages can be more complex than residential, so access to premium lenders is necessary. As your commercial real estate agent, I can often make recommendations.

Is the Existing Lease Transferable?

Buying a business doesn’t always include the land or the building. Often, you get the name, operations, and hopefully, the client list, but the premises may not be in the contract. Before making assumptions, you want to ensure you will be able to take over the existing lease and that the terms are favourable to you.

Will I Have Access to Existing Clients and Suppliers?

“Assume nothing” is excellent advice in general, especially when buying a business. Purchasers often count on having access to existing contacts only to find out they’re expected to build everything from scratch.

Examine your contract closely to ensure you will have access to all of the current owner’s clients. In addition, take a look at how much revenue each customer generates. Otherwise, you might have some expensive and unexpected marketing costs to acquire a client list of your own.

Will the Current Owner Offer Support During the Transition?

Even if you’ve owned multiple businesses before, every operation is different. It helps to have a knowledgeable insider guide you through the daily routine, at least in the beginning.

How Long Will the Purchase Take?

This question is difficult to answer given that every scenario is different. Commercial transactions generally take longer than residential due to the higher number of complexities. There are more details and terms to negotiate and more people involved in the purchase, and you’ll also need to account for the occasional disruption.

All of these are part of the process. With patience, commitment, and expert guidance by your side, you can bypass many complications and enjoy the fastest transition possible. Once you take ownership, you can begin putting your own unique mark on your business.

What Legal Support Will I Need?

The level of legal support will vary depending on the structure of your company. Some industries are more highly regulated than others. In addition, the more employees you have, the greater your liability.

Start by talking to the existing owner to see if there have been any major lawsuits in the industry. They may or may not give you the whole picture, but their answers will give you something to take to your existing legal team.

Are There Any Industry-Specific Factors I Should Know About?

There will almost always be industry-specific factors to be aware of, no matter what type of business you’re buying. First, you’ll need to know about any laws and regulations regarding your industry.

Next, consider the long-term trends that will either support or detract from your profitability as time progresses. This is especially important in certain fields, where a disruptive technology can make or break an entire industry. Always consider whether or not there will be long-term demand for your product or service, or at the very least, if you can pivot your offerings to something else.

When buying or selling a commercial or residential property, it pays to understand long-term market trends. The posts below will give you some valuable insights:

Should I Work With a Commercial Real Estate Agent?

Finally, an easy question! Yes, you absolutely should. A commercial real estate agent can do much more than help you buy or sell a piece of land or lease a building. A local expert will be up to speed on the specific locations to begin your search, as well as any zoning regulations that might impact you in the future.

They’ll be able to give you insight as to how much foot traffic a certain area receives, helping you to estimate the size of your local customer base. Whether you plan to buy or lease your space, a commercial agent will negotiate on your behalf for the best terms possible.

Do you want to know more about buying a business or commercial property in the GTA? I have years of commercial and industrial real estate experience and am happy to guide you through the process. Connect with me at OMarjanovic@kw.com or call 647.620.2882 to learn more.