When you own your own business, you probably focus on expanding your offerings in as many ways as possible. In some cases, that could include acquiring another company.

While the prospect of an acquisition might seem exciting, performing your due diligence before closing the deal is imperative in protecting your interests. However, do you know what to consider as you explore the option of purchasing an existing business?

Three things you should consider before you acquire a business

Depending on the business you are interested in, you may not have much public information available regarding their background. And while a company’s financial history is important, many other things could either help or hinder its progress moving forward.

You likely will not find a “perfect” company, but anticipating potential challenges up front could be instrumental in increasing your profits in the future.

Some of the things you would be wise to consider as you enter into purchase negotiations include:

  • Market. How do the company’s offerings compare to others on the market, and who is their competition?
  • Property. What intellectual property does the company own, how is it protected, and have they granted exclusive licenses to any third parties?
  • Finances. What do the company’s financial statements from the past three years show about their performance, and what kind of investment will you need to make to increase capital?

Examining another business can take time and money to complete. However, understanding what you are getting yourself into can help you make wise choices, determine an appropriate price point and minimize potential legal trouble after the acquisition is complete.