Top Mistakes that Occur when Buying a Business
If you didn’t read the last blog post about buying a business, I recommend you read that one first as this one will make a lot more sense if you do. If you don’t want to reread the last one, I’ll summarize it in one sentence. Buying a business is a lot of work, hire a team to help you, the professionals at the Center for Financial, Legal, and Tax Planning, Inc., are the Avengers when it comes to buying a business, so hire us, the end.
Now, onto the issue for today. Mistakes happen, everyone makes them, if someone tells you they don’t make mistakes then you found a liar. Some of the most common mistakes people make when buying a business are signing documents, trying to do everything yourself, making changes too quickly, infrequent communication, doing the deal even if it doesn’t make sense, and not understanding how taxes work.
How can this be one of the most common mistakes people make? You just sign on the dotted line next to the X, right? Well, kind of, but instead of signing your name, you should be signing the business name here. Why though? By signing in your name, you are taking on liability instead of the business taking that on. You should have created your business before you even got to this point in one of many different forms like an LLC, an S Corp, or others that you will now use to sign documents relating to the purchase of your new business.
Trying to do everything yourself
I get it, asking for help is hard to do, but it’s essentially the same thing as watching a YouTube tutorial before you start that demolition on your bathroom that is going to take you six months to do when a professional could have it done in two weeks. Ask for help, hire the right team, I can’t stress this part enough. Your team will guide you through every step in the process. Last warning, ASK FOR HELP!
Making Changes Too Quickly
The saying, “Rome wasn’t built in a day,” comes to mind here. You bought a business and change 1000 things on day 1, well guess what, all that work building Rome is now destroyed, Vesuvius exploded and took Rome out too (don’t check my geography on this one, I know it was Pompeii that was destroyed by Vesuvius). You’ve now lost employees and customers; the business is now critically injured. Instead, think of the Tortoise vs. the Hare, slow and steady wins the race. By making small implantations over some time, you can see what works and what doesn’t without drastically altering the business.
Ever have that friend that disappears for months on end then pops up and asks to borrow money only to disappear as fast as he came? This is that same concept. You should look to establish regular communication with your team and the seller. This will ensure a much smoother process and create a better transition if you do go through with the purchase.
“The only things certain in life are death and taxes.” You have to pay them, the government wants its money, and you want to pay less for them. This is something often overlooked and can result in a big tax bill, or even worse, an audit. No one wants that, that team sure would come in handy at this point, wouldn’t it?
Don’t make these mistakes when buying a business, contact the professionals at the Center for Financial, Legal, and Tax Planning, Inc., to help guide you through every step. For more information, please reach out to us at (618) 997-3436.