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Questions to ask when buying a company

On Behalf of | Mar 5, 2020 | Buying & Selling Businesses |

Entrepreneurs in North Carolina may decide that they want skip the startup phase of owning a company. Instead of creating a company from scratch, they will buy a business that already has brand recognition and systems in place. While it may be easier to make money with an established company, it is still important to do due diligence before making a purchase.

One of the key questions to ask is why the current owner is selling his or her business. For instance, an individual may have put a company up for sale because that person anticipates a future disruption to the market. Of course, it is also possible that a business owner simply wants to retire or do something else with his or her life. Buyers may not want to purchase companies that are on the market because they have a poor brand reputation.

In many cases, it can take years to overcome the damage that the current owner has done to a brand’s reputation. It is also generally not a good idea to buy a company that is either losing money or is not as profitable as it could be. While a buyer might be able to operate the company more effectively, there is no guarantee that this will happen. Even if a company has a good reputation in the community, that goodwill might not transfer to a new owner.

An attorney may be an essential part of a team to help a person purchase a business. Legal counsel may be able to review a purchase contract or go over financial documents with a buyer. This may allow a person to better understand if a company is profitable or if the business is worth what the seller is asking to be paid for it.