Mistake #10 - Relying Too Much On Financial Documentation

Something changed in your life and you decided to own a business. You could probably start from scratch, but considering all pros and cons decided to acquire an established business. Well, it's a very wise decision as long as you do it right. Unfortunately, new business buyers make many mistakes that make business acquisition much harder, some times causing substantial financial and emotional hardship, other times loss of otherwise promising business opportunity altogether.

Let's review 10 major mistakes that business buyers make that prevent them from successfully buying a business.

• Mistake #1 - Procrastination 
• Mistake #2 - Making Assumptions 
• Mistake #3 - Not Asking Right Questions 
• Mistake #4 - Being Overly Aggressive 
• Mistake #5 - Falling In Love With A Business 
• Mistake #6 - Not Being Able To Compare Businesses 
• Mistake #7 - Not Using Intermediary For Negotiation 
• Mistake #8 - Forming Partnership Without Proper Documentation 
• Mistake #9 - Allowing Counselors Making Buying Decision 
• Mistake #10 - Relying Too Much On Financial Documentation

Mistake #10 - Relying Too Much On Financial Documentation

So, you found a suitable business for sale and want to check it out. You need to know if it's really a good match and you "won't get a lemon". If you're a serial entrepreneur and bought several businesses before you know what to do. However, if you're buying your first business, it becomes a real challenge. What documentation to review? What questions to ask? Obviously, you can go online and google something like "how to check out a business for sale". However, you will get a generic list of documents and questions that has very little to do with your target business. If you don't understand financials or other documentation, hire professionals to review it for you. While working with counselors don't forget our Mistake #9 and stay in a driver seat. Business and financial documentation can tell a lot to an experienced person.

However, don't bet your entire buying decision on Profit & Loss statements. There's a lot more to a business than just a bunch of numbers. While reviewing the documents you'll have many questions. Remember our Mistake #2 - don't make assumptions. Ask the seller or their broker for explanation. literally line by line.

Arrange for a meeting with the owner. Ask questions about history of the business, owner's philosophy and people in the business. Make sure that your personal vision and philosophy are in line with the owner's. Will you be able to operate the business similarly to the owner? Are you as strong entrepreneur as he is? Are you as good salesperson? This information is just as important as net income.