Getting ready to purchase a business, especially for the very first time, can be exhilarating. Owning your own business can be the start of a whole new lease on life, but it’s also a time when you want to make the right decision with your investment.

Across this series on red flags in business acquisition, we’ve detailed potential concerns to keep an eye out for across the finances, the team and even the product and service offering, however there are certain red flags that can only fall under the ‘trust your gut’ category.

While financial due diligence and meticulous analysis are indispensable, there’s another invaluable asset that often goes overlooked in this process: intuition.

Trusting your gut can be the difference between a successful acquisition and a costly mistake. Here in Part 4, we’re closing out this blog series with some of the more intangible red flags that savvy business buyers should heed.

Cultural / chemistry disconnect

While you don’t need to become close acquaintances of the current owners to run a successful business, a harmonious cultural (or ‘chemistry’) fit between yourself and the prospective business team will always set you on the right foot. 

Understand your values beyond business, and the principles you operate on in your daily life – does this business value the same? Will your ways of thinking clash with an existing team? Wider cultural disparities that may hinder integration and collaboration post-acquisition.

Founder footprint

An involved team is great, but a possessive founder can create some challenges. If the owner and founder is overly active within the business, this could suggest a reluctance to let go of control or a lack of commitment to the future success of the company when they are gone. A founder who is unwilling to transition smoothly or invest in the business’s continuity may indicate underlying issues that could impede growth and innovation. Tune into your intuition for signs of being overly difficult, demanding or negative about handover discussions (or an avoidance of this discussion entirely!).

General morale

When you walk into your prospective investment, how do you feel? Do employees seem busy and content, or overworked and frustrated? We’ve touched on the importance of a cohesive team structure and how important this is for the transition to a new owner. A disgruntled workforce not only undermines productivity but also poses challenges for future talent retention and culture change efforts. 

Local business perception

There’s nothing quite like doing your own research while trusting your intuition, so connect with other local businesses and see what the general sentiment is about the business you’re looking to acquire. Do other local businesses know the owner and team? Are they a part of the community or clearly demarcated from? Do they have any bad blood in the area, and why? If you take on a business who has already made themselves local enemies, it means double the effort to clean up this reputation. 

Finding a sounding board

If you have a business broker you’re working with, run any instinctual concerns past them as well, as they can deep-dive further into these or provide evidence to the contrary. It’s also natural to feel tense when making a big decision, so find people who you trust to act as your sounding board to ascertain if your concerns are warranted or if they are just ‘pre-purchase jitters’.

Your line in the sand

Before you start investigating a business to purchase, set out your own expectations and ‘deal breakers’ much like you might for dating. Return to this list as you work through the process and ensure you aren’t compromising on important ‘checkboxes’. Whether it’s your maximum spend, the handover period and support required or a particular buyer-seller relationship dynamic, know what you’re looking for from the start, and this will ensure you stay true to your goals and ethics. 

In the high-stakes game of business acquisition, instincts are often the silent guardians that guide us through uncertainty and ambiguity. While financial metrics and operational assessments provide valuable data points, they only offer a partial view of what’s to come. Trusting your intuition allows you to tap into those instinctive decisions or feelings of ‘Something isn’t quite right.’

Above all, feel equipped and empowered to trust your gut and never rush into a business decision.