There is this small business in my area that is for sale for ~$1.2 Million. I know that the business is a bit struggling (and I know the reasons). As a customer in the sector, I know that there is demand and I have some ideas to increase the gross revenue and the profit margins. This is an absentee-run business with ~12 employees and a manager.
I have a full time job (in a different sector) and I want to keep it. I have never run a business but I have successfully managed big long-running projects. I have a CS degree but read some books on finance and business. I am married with a kid and we have a net worth of $500k. It is a bit scary to buy a million dollar business.
Question: I am curious if anyone has any suggestion on how to tell if it is okay to buy a business twice someone’s net worth. Is it too big of a step for a first business? Any suggestion on risk analysis or minimizing the risk here?
Make sure to get at least 3 years worth of both Financials and tax returns.
Watch out for tricks that can be done to boost profits (like foregoing an owner salary) or expenses they don’t have that you will (like if they own real estate outright they won’t have a mortgage, but you will).