What to look
for in a business purchase
Everyone has their own opinion. Here's mine! I
hope you find them useful as a starting point. cb
How long has the business been in operation?
How long with present ownership?
Is the rent current? What is the length of time left on the
lease? Are there any options to renew?
If a franchise, how long is the franchise agreement good for?
What is the cost to re-new? Are there any remodeling requirements
to update to present color and design schemes?
Why is the owner selling? To make a profit? Good reason! Declining
sales? Good opportunity! New road coming through and he has already
been reimbursed by the state? You might want to pass unless it
is a steal. Crime? Fire? Rezoning? All public records, do your
due diligence. Divorce? Death? Undercapitalized?
Sometimes even more important than why, is what happens after?
It will be difficult to get the real reasons of a sale, until
you are committed to buying the business. Then, many times the
seller opens up and you find yourself with a consultant or partner
in your success. Remember, how you ask is more important than
what you ask.
Tax returns (filed!), state sales tax returns & canceled
checks, books and records, customer receipts, vendor list, supply
list, inventory list, accountability methods, up to date workman's
compensation records, personal property taxes have been paid,
liens on the business, UCC filings, accurate asset list, good
will and intellectual property rights.
Don't expect a broker, attorney, accountant or your uncle
Henry to uncover all the aspects of a business. It's your money
and your personal guarantee. The reason no one can give you a
'complete list of things to check' is because if one thing is
overlooked on the list, guess who gets to pay the consequences?
I've been there...
Business Buyer Resource Center - "Learn 100s of tips, strategies
and techniques to help you find and buy the right business".