You already know that buying a business is one of the biggest investments you can make. But it’s also one of the biggest risks. Imagine investing all that money only to be left with a business that has more cracks than you can count and you need to spend more time fixing problems than growing the business. This happens more than you think.
Why? Because buyers focus on the financial aspect and just assume everything else goes smoothly. Why wouldn’t it, right? That’s a safe assumption to make. Most of the time, however, that’s not the case and what’s behind the numbers might shock you. Outdated systems, inefficient processes, and only a handful of employees that know how to keep things running. Until they leave, that is.
It’s a mess that no amount of revenue can fix, which is why you need to dig deeper and see what’s behind the profit. If you don’t, it might cost you millions in lost time, employee turnover, and fixes you never expected you’d need to make.
What to Watch Out For When Buying a Business
You’ve done your research, and you’ve come to a realization that each city/province holds its own set of rules, challenges, and opportunities; and the business you want to invest in will surely be determined based on those factors.
Here’s a quick overview of what you might come to expect across a few key cities in Canada:
| Aspect | Vancouver (BC) | Toronto (ON) | Montreal (QC) |
| Market Stability | Stable, real estate-driven | Stable, finance-driven | Stable, diversified economy |
| Regulations | Strict zoning laws | Strict business regulations | Moderate and startup-friendly |
| Industry Growth | Tech, tourism | Finance, tech | AI, aerospace |
| Cost of Operation | High (cost of real estate) | Very High (especially downtown) | Moderate to high |
| Tax | Moderate | High | Lower |
| Competition | High in real estate and tourism | High in tech and real estate | Highly competitive in AI and tech |
Once you’ve done all the research based on where you want to conduct business, you’ve surely browsed through sites like https://www.findbusinesses4sale.com/businesses-for-sale-in-vancouver-bc/, and found the business you want to invest in. Now, you’re hoping for smooth sailing and full pockets, but that can’t happen because you only paid attention to the money side of the business. Everything else? It’s chaos.
Here’s what you should have checked.
- No SOPs
SOPs stands for Standard Operating Procedures. If the business doesn’t have clear, documented SOPs, it’s kind of like if a sports team didn’t have a playbook and everyone did things their own way. Basically, it’s a recipe for disaster.
When employees use their memory instead of written guidelines, they make small mistakes that turn into huge problems. Training new hires is slow, frustrating, and if the most experienced employees leave, they take crucial knowledge with them. Every well-run business has clear instructions on day-to-day operations, how to interact with customers, and internal processes.
Before you buy the business, ask to see existing SOPs and make sure they’re not just random old files sitting on a server. You want them to be used actively.
- Being Heavily Dependent on Key Employees
A business with a few key employees everything revolves around is a ticking time bomb. If only a handful of people hold all the knowledge, what do you do when they leave? All of a sudden, you’re left without anyone who can handle major accounts or critical workflows.
Relying on employees in this way will make any business fragile. A well-structured company needs to have clear training systems, employees that have been cross-trained, and practices to share knowledge in the workplace. If you see that a business depends on specific people rather than systems, it’s too big of a risk.
- Poor Workflow and Task Management Systems
If a business has old, inefficient workflow systems, they’re wasting their time, money, and resources. Employees need to have a structured way to manage tasks or things fall through the cracks and the company misses deadlines.
Look for bottlenecks in production, sales, or customer service because it could hurt your profits. If you notice that the business works with spreadsheets, paper-based processes, or a patchwork with tools all over the place, they’ll struggle to scale.
A modern company has efficient project management or they use automation tools to keep everything running smoothly and organized.
- High Employee Turnover or Low Morale
The backbone of any business are its employees, and if they’re unhappy or leaving all the time, that’s a big red flag. High turnover can be a sign of poor management, a toxic work environment, or weak operational structure. It never points to anything good.
Before you make the investment, check the turnover rates in the past, all the reviews employees left, and satisfaction levels. Ask the current management about training programs, opportunities for career development, and see how the employees feel about leadership. If you see that the team is disengaged or there’s a new resignation every week, you’ll need to spend a lot of time and effort to fix the culture in the workplace and rebuild trust.
- Problems with Inventory and Supply Chain
A business that can’t manage its inventory effectively becomes a financial drain sooner or later. If they’re always running out of stock, the customers will get annoyed and spend their money elsewhere. There’s another side to this, too. If they’re overstocking on products they can’t sell, all the money is tied up in piles and piles of inventory.
If there are issues with the chain of supply, there’s a good chance that suppliers are unreliable, there are delays in shipping, or they can’t fulfill their orders on time. Either way, it’s a red flag and before you commit to buying, do some research. See how inventory is managed, what’s their relationship with the supplier, and how often they have shortages or delays.
Conclusion
Usually, it’s the financial issues that are the most obvious, but that’s not all that can go wrong with a business. Issues with operations are just as problematic and if the business is not running smoothly, it costs a lot of time, money, and frustration to fix.
Before you actually buy it, do a lot of research, ask as many quotations as you can, and dig around to find red flags. If you don’t, you’re taking a huge unnecessary risk.
