What To Look For

Based on my experience here are some suggestions. As you begin your search, keep in mind that owning and operating your own business is more than a job. It is a lifestyle change. In most cases, it is a big lifestyle change. Most buyers are looking for many of the following when considering the purchase of a business.

  • Pride in the services or products offered
  • Personal flexibility
  • Income and return on their investment
  • Control of their own destiny
  • Recognition
  • Security for their future
  • Privacy

Listed below are a few key points I think you will want to consider before purchasing a business.

How long has the business been in business?

A business with a long track record means to me there may be numerous good reasons to be operating. The business may be well known in the area and people will be used to patronizing the business. Usually the longer it has been in operation, generally, the better.

How long has the present owner owned the business?

The longer the present owner has been in business, the more likely it may be that he or she has been successful.  It seems most people typically don’t stay in business if they are not making money.

Why is the present owner selling?

The more valid the reason for sale, the more realistic the seller may be in considering your offer. The seller’s motivation matters. However, keep in mind that after five or six years or more, people can get restless; “burn-out” can set in, and people sometimes look for new challenges. Why the seller is selling is an important question. Get the answer.

Why are books and records important?

The financial records, if reasonably accurate, are a good indication of how the business has been performing. I always keep in mind that tax records are commonly not designed to show a business in the best light, because no one likes to pay more taxes than they have to. Owners of businesses and their tax advisors are no different. Conversely, buyers should look at the expenses to discover which ones, if any, are “non-cash” items, such as depreciation, business use of a home, personal vehicles etc. Financial records are only history. There are no guarantees that they will or can be automatically duplicated or repeated. In the final analysis, the financial records of the business are an indicator of what the business has done. However, what you do with a business in the future is up to you.

How can you determine if the seller is reporting all sales revenue, incomes and expenses?

The simple answer is – you can’t! Not reporting income is against the law. I believe it is best to consider only the income that the seller’s records show. Especially in cash sale businesses, there is the possibility that the seller is not reporting all of his or her income. In determining whether a business is right for you, consider basing the decision on the figures in the records supplied to you by the seller.

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The Buying Process