Don t Let Passions Rule When Buying A Business

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1 Buying A Business September 2018 Article Courtesy of: Dawkins Brown Crowe Jamaica Trinidad Terrace Kingston 5 Jamaica Tel Fax

2 Don t Let Passions Rule When For many, the dream of owning a business is in queue right behind owning a home. I was a teenager when I owned my first business. Since then I have bought or started many businesses and helped others do the same. Here are some common mistakes I have witnessed or committed myself. Paying too much This results from the combination of all other mistakes. Many new business owners set themselves up for failure by paying too much, which results in higher loan payments, lower operating funds, and reduced borrowing capacity. Letting your emotions rule If you have always dreamed of owning a business, it is very easy to get caught up in the strong emotions invoked by seeing those dreams coming true. To counteract your emotions, take your time, do your homework, and enlist the help of objective advisors.

3 Paying for potential You should only pay for the business as it stands at the date of purchase, not what it could be in the future. You will have to spend time, effort, and money to develop its potential. The seller chose not to invest these things, so he does not deserve to be paid for them. Not evaluating yourself Do you have what it takes to run this business? Try to match your strengths to the important duties you will be required to perform. Running a small business requires the owner to do many things. No one can be good at them all, so make provisions for those areas in which you are the weakest. Some tasks like payroll and bookkeeping can easily be contracted to outside vendors. Possibly your spouse, other family member, or a partner could do things that you cannot or do not want to do. Not building a team of experts At a bare minimum, you should enlist the aid of an attorney and an accountant. The attorney can prepare and review documents, help structure the deal, and make you aware of legal and liability issues. The Accountant can provide a financial analysis of the business, and advise you about tax and accounting matters. You should consider adding a business valuation professional. His valuation report can be used to determine the reasonableness of the asking price, negotiate a lower price, and provide valuable information about the business, the industry, the competition, and the economic conditions. Relying on bad information You should verify all important information about the business. Your Accountant can check financial information like receivables, payables, and inventory. Your attorney can review loan documents, leases, and contracts. Your business valuation professional can analyze the competition, the industry, and the economic conditions. Use independent appraisers to value real estate and equipment/ You can do some of the investigating yourself to save money, but do not cut too many corners it may cost you in the long run. Changing too much, too fast Once you own the business, you will be tempted to start making wholesale changes from day one. You risk alienating long-time employees and customers. Unless the business is in bad financial condition and needs immediate action, its better to take some time to get to know the business, your employees, and your customers before making changes. This is a perfect time to solicit suggestions from employees and customers.

4 Buying a business because you like to do what the business does One reason restaurants have a high failure rate is people buy or start them because they like to cook. Very few restaurant owners spend time cooking. Their time is spent managing staff, ordering supplies, doing paperwork, and handling daily crises. A small business owner must wear many hats including that of manager. Conclusion Buying a business is a complicated, emotional process. By avoiding these costly mistakes, you can prevent turning your dream into a nightmare.

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6 About us Crowe Global Ranked the eighth largest accounting network in the world, Crowe Global has over 180 independent accounting and advisory firms in more than 130 countries. For almost 100 years, Crowe has been making smart decisions for multinational clients working across borders. Our leaders work with governments, regulatory bodies and industry groups to shape the future of the profession worldwide. Their exceptional knowledge of business, local laws and customs provide lasting value to clients undertaking international projects. Crowe provides global reach on a personal scale. Firms are focused on the future and the client experience, working with clients to build something valuable, substantial, and enduring. Close working relationships are at the heart of our effective service delivery. At Crowe, our professionals share one commitment, to deliver excellence. Crowe Jamaica Crowe Jamaica is a professional service firm offering a full range of Audit, Accounting, Advisory and Taxation Services. We are a firm of chartered accountants whose concept of service is to solve problems, exploit opportunities and turn advice into action. Our style is personal and our outlook progressive. We continually strive to create value for our clients. Established in 2002, we have become one of Jamaica s leading accountancy practices and lead the field in the provision of advice to private clients and business owners. Crowe Jamaica is one of the largest public accounting, consulting, and advisory firms in

7 Jamaica. Crowe Jamaica uses its deep industry expertise to provide audit services to public and private entities while also helping clients reach their goals with tax, advisory, risk and performance services. Crowe Jamaica serves clients worldwide as an independent member of Crowe Global. The network consists of more than 180 independent accounting and advisory services firms in more than 130 countries around the world. Our network of Jamaica offices (Kingston, Runaway Bay, Montego Bay and Mandeville) ensures that we can provide a local service backed by the expertise of a major national practice. Our firm provides outstanding service to our clients because of our dedication to the three underlying principles of Professionalism, Responsiveness and Quality. Crowe Jamaica is particularly known for our one stop shop concept that was, according to our client s experience, of invaluable significance to those companies that are establishing their business operations in Jamaica. To respond to clients growing demands, we developed deep industry specialization together with innovative technology, which enables our dedicated professionals to create value for our clients with integrity and objectivity. Furthermore, membership in Crowe Global provides us the worldwide capabilities of a highly integrated network to deliver value to multinational clients doing business across borders. Our professionals are experts who all share a commitment to delivering technical excellence and the highest standards of client service. Relying on both international expertise and the local office strength, Crowe Jamaica approaches its clients in a comprehensive and responsible way. For information regarding our services contact us: info@crowehorwath.com.jm