1. Know why you are buying “that business.” Do you know the product and market, or do you see major opportunities there? Do you want to buy this business for the love of it? More than anything, do you want to be an entrepreneur?
2. Project realistic revenues and profits for next three years. Don’t buy a business where the demand for its product is declining. Do your market research to forecast the sales.
3. Fully understand your capability. Prepare an analysis of the Strengths, Weaknesses, Opportunities, and Threats of this business. Are you qualified in terms of experience, knowledge and finances to meet these challenges?
4. Try to leverage the purchase with the seller. Negotiate to pay with as little cash as possible. Finance the remaining balance.
5. Preferably retain the seller as adviser. When you have the seller to train you, the learning curve becomes shorter. You don’t have to reinvent the wheel.
