David C Barnett Small Business and Deal Making M&A SMB 7 Costly Mistakes When Buying a Business
Apr 23, 2025
Discover the seven costly mistakes buyers often make when acquiring a business. Learn why due diligence is crucial and why conventional online advice might mislead you. Delve into the importance of quality of earnings reports, especially for small businesses, and how they can shape your buying strategy. The discussion emphasizes the need for meticulous planning, emotional control, and tailored research to avoid pitfalls. Gain insights on preparations you should make, including understanding products and valuable resources to streamline your acquisition process.
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Tailor Due Diligence to Business
- Do proper due diligence tailored to the industry and business type when buying a business.
- Involve a CPA to identify key review areas, but personally examine details to learn the business and save costs.
Broker Error Leads to Overpayment Risk
- A buyer almost overpaid for an HVAC business due to a broker's mistake inflating earnings.
- The buyer had no industry experience and was influenced by hype without understanding typical margins.
Check Working Capital Carefully
- Analyze working capital needs including inventory and net current assets before buying.
- Confirm what working capital is included in the deal and budget for any additional capital requirements.
