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Tuesday, October 2, 2018

3 Must-Ask Questions if You Are Considering Buying a Business

If you are considering buying a business, you need to ask several questions first. Getting the right information will be integral to determining whether this is a smart business decision for you. It will also help you decide how to best carry on the business after you have purchased it. You should ask the following questions before you commit to buying a company.

1. Do the financials seem sound?

The books are going to be very important if you are considering buying any type of business. As a buyer, you should be asking for bank statements and profit and loss statements. You may also want to see any contracts with employees, suppliers, or lessors. Ongoing deals with advertisers should also be examined.

Looking at the financials for specific product areas or by quarter can also be helpful. Smaller businesses may not have very detailed records but taking a look at what they have can be helpful. If they don’t have any records at all or the records consist of receipts in a shoebox, that can indicate a problem. Tax records may be a helpful place to start if the seller doesn’t have anything else.

2. Is this really what I want to do?

You may be considering purchasing a business because it is the hot trend of the moment or it seems like a good investment. However, you should think about whether this is something you actually want to do on a regular basis. Unless you hire a general manager to be there to manage the day-to-day operations, it will be up to you. Is running this business really what you want to be doing day in and day out?

It might be helpful to watch what the current owner does or ask employees about their experiences. Talk to the current owner about what his or her daily life is like. You may find yourself in a situation where the current owner practically lives at the business—if that is not what you want to do, you may need to make some personnel changes.

3. Why is the current owner selling?

Ask the seller why he or she is selling. If they just want to retire, that is one thing, but if there are signs the business is struggling, and the owner is trying to get out while they can, that may be more than you want to deal with.

You may also want to ask what the seller would do differently or what they would do with the business next if they were staying. Questions that focus on the future of the business can give you insight on how the owner thinks it is going. It can also give you an idea of the business’s brand and how large of a role the owner actually played in the success of the company.

There are all kinds of other questions you may want to consider asking. Having professionals, including a business attorney, look at the state of the business can be extremely helpful.

The Law Office of Randall P. Brett has assisted many business buyers in analyzing, evaluating, and consummating business purchases. Contact us if you are thinking of buying an existing business or starting your own venture.


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