subject: Buy a Business [print this page] Buy a Business Buy a Business
There are no guarantees in business and the risks must always be managed, buying an established business clearly offers significant advantages merit considering if you want to own your own business. In order to buy the right business or franchise, you need to investigate its historical performance, operations, current status, staff and management, competition, industry and its future potential, all of which is so much easier to do with an existing business.
Buying an existing business can be easier than starting one from scratch. Developing your own ideas and building the company from the ground up. In most cases, buying an existing business is less risky than starting from scratch. When you buy a business, you take over an operation that's already generating cash flow and profits. You have an established customer base, reputation and employees who are familiar with all aspects of the business.
Buying a business, regardless of its size, can be a complex process. "You will want to enlist the help of a qualified attorney and a certified public accountant, as well as any other trusted advisors. These advisors are essential to what is called "due diligence", which means reviewing and verifying all the relevant information about the business you are considering. When due diligence is done, you will know just what you are buying and from whom. In terms of the numbers and financial side of your vetting process, select a certified public accountant that has experience in analyzing several years' worth of financial statements and tax returns provided by the seller. Your accountant should also understand any tax consequences associated with the purchase and structure of the deal.
There will be differing views on what the business is worth. Regardless of whether the seller has a desired asking price, you will want to come to your own conclusions about the value of the business. So be ready to negotiate and bridge the inevitable gap between what you think the business is worth and what the seller wants. You also need to assess the company's reputation and the strength of its business relationships. Talk to existing customers, suppliers and vendors about their relationships with the business. Contact the Better Business Bureau, industry associations and licensing and credit-reporting agencies to make sure there are no complaints against the business.
If you've thoroughly investigated a company and wish to go ahead with a purchase, there are a few more steps you'll have to take. First, you and the owner will have to agree on a fair purchase price. A good way to do this is to hire an experienced appraiser who can estimate the company's fair market value.
If all goes well, you and the business owner will agree on a fair price as well as other aspects of the purchase, written sales agreement and possibly have a lawyer review it before you sign on the dotted line.
