5 clear signs that you’re buying an overpriced business.
When buying an existing business you need to be much more careful than you would be while establishing a business of your own. While there are a lot of advantages that come with an existing business, there also comes a lot of things that you, as a buyer, need to worry about. The market is overflowing with businesses for sale and a lot of these might seem very attractive at first glance, but you need to be well aware of the fact that not all which glitters is gold. Not all businesses that look worthy are actually worthy of the price that is been asked for them. One thing that you should be sure of before you buy a business is to check if the business is overpriced. With that in mind, here are the five clear signs that the business you are buying is overpriced.
Before you buy a business, make sure you have a comparative statement of the prices of similar businesses in the vicinity. For example, if you have a business for sale in Miami, you need to research the business prices around that location. After you do this, you should only proceed with the plan of buying a particular business if the price offered for it is on a par with the prices available in the surroundings of your location. Although a little variation in the prices is understandable, you must also not be in a hurry to buy the business when the price is unsuitable.
A proper valuation of a business that you’re planning to buy or have already decided to buy always saves you the possibility of being ripped off. You must always make sure that you have the valuation done from a trusted attorney before you buy a business. If the said price of the business that you’re interested in happens to be more than the valuation of it, it is clear red flag. In fact, this is probably the time that you save your efforts and resources and make an exit from the deal.
- Unclear financial record:
If you have come across a business that seems suitable enough for your goals and interests, and the cost is affordable according to your financial status, you should still not go ahead with the decision if the company is unable to produce proper financial data of its dealings. A legitimate business for sale is supposed to have a well-structured balance sheet of its incomes, expenditure, profits made, and losses suffered. This data sheet is to be produced to any prospective buyer once the confidentiality agreement is signed. In case your business seller fails to produce a balance sheet or makes excuses to avoid this discussion, you should identify the fraud and cancel the proceedings of this business deal right then and there.
- Hidden taxes/ costs:
Make sure that the price that you agreed to buy the business for is exactly the price you pay. Do not get tricked into paying for hidden taxes and costs. These charges could include the fees of the business broker or legal advisors and could be slyly shifted to your court. Such hidden charges might not be mentioned along with the asking price and could be included later, much to your surprise.
Before you go ahead with the process of buying a particular business, make sure you ask the current owner about any potential hidden costs. This might come off as a little rude, but is sure going to save your pockets in the long run.
- High priced lease/ rent:
It is a possibility that the business that you’re planning to buy might not be established on its own property. In this case, you need to be sure about all the legal documentation about the lease or the rent. The lease needs to be transferable and of affordable value for you to decide if the business can be purchased or not. If the price of the lease or the rent is unlikely high, it is about time that you back out or solve the issue by talking to the owner of the property. Whatever the case is, make sure you are not the one to pay the extra for a poorly negotiated lease or rental agreement.