Buying a Business? Ten Considerations

“If you decide you want to purchase a business as opposed to creating your own from scratch, make sure you know exactly what you’re buying.”

I don’t always recommend that you seek out an attorney and a financial advisor for your business safety and peace of mind.

And most of you know that I don’t recommend the would-be solo business prospect buy an already established business “package” that is sold as a one-size-fits-all product.

But if that’s your intent, and you have thoroughly checked out the business as I have suggested elsewhere, you still need to make absolutely sure this transaction is exactly what you intend. Surprises are not a good thing when making a sizable purchase.

Since you will most likely be investing a good deal of your hard-earned money in the purchase, and you will be spending the better part of your waking hours on managing your new “used” company, you would be well advised to consult with legal and financial counsel prior to closing the deal.

Even though attorney and accountant fees are high, they will likely look at your impending purchase with a level of professional scrutiny that you wouldn’t. They will find the professional reasons, if there are any, why you should back away.

Maybe the very best investment you will make in your new business is the one that alert’s you to red flags that can keep you from being profitable regardless of how competent you are as a business owner.

If you do plan to move ahead with the purchase, be sure to answer the following questions about the sale:

1. Is there any special knowledge, history, or expertise that will be important to the success of the business that I don’t have (or can’t get)?

2. What liens, liabilities, accounts payable and other outstanding debts or notes are tied to the business? Will I be assuming any of these?

3. Exactly what are the “hard” or physical assets worth? How much “blue sky” and good will is being figured into the sales price?

4. What outstanding commitments and contracts are currently in place and will they have to be honored?

5. What protections are in place including trademarks, copyrights, patents, name registrations, intellectual property, and other legal assurances? Is there currently an insurance policy covering the business and its assets and will it be extended?

6. Who are the wholesalers, suppliers, bankers, and creditors of the business and will they deal with a new owner? Does the business have a credit rating with them and will they change any of the terms extended to the new owner?

7. Will I be able to extend the state, county, and local business licenses and registrations or will I be required to start that whole process over again?

8. Does the business owe any back taxes, penalties, etc. and is it in good standing with the IRS, Uncle Sam, and state and local governments?

9. Are there any partners or investors in the business that either don’t know about the sale or expect to be paid for their equity? (It has happened more often than you would think: a small business owner sells the assets of a business without the permission of family or friends that are investors. There may not be any written documentation regarding the existence part owners, especially in a family funded business.)

10. Could I start a very similar business from scratch and would that be a cheaper way to get into this business? (It will almost always be a safer, less complicated approach.)

All of these questions get at the main consideration: do I understand fully what I am getting and the obligations I am taking on when I make this purchase?

To your online business success,

Steve Browne

www.SteveBrowneDirect.com