Purchasing an existing business is an exciting prospect. You have visions of putting your own stamp on the enterprise and building it into a great success. However, several steps are in order to ensure that this business is right for you and will be a good investment.
Start with the past
How has the company developed over time? You will want to look at the income statements for the past few years and ask your accountant to prepare an income projection. Your accountant should also review recent tax returns for the company. Take a look at the customer base, past to present. Find out how many employees there are and what kind of turnover there has been.
Assets, liabilities and taxes
What is the reason for the sale? Provide your attorney with pertinent business documents to make sure there are no hidden clauses. Go over the assets and liabilities. If you are to be responsible for the latter as the new business owner, are resources sufficient to cover them? Have your attorney examine the lease, as well; you may have to negotiate a new one.
Engage the services of an appraiser who can put a value on the company; you do not want to pay more than the business is worth. Discuss payment and rate with the seller. Figure out how much capital you will need to operate the business once you become the new owner.
Inventory, equipment and suppliers
Are the equipment and systems up to date and in good working order? If products are involved, how much inventory is on hand? Find out who the key suppliers are; contact them and determine whether they will continue to do business with you as the new owner.
While your attorney and accountant are performing their work relative to your business purchase, continue with your due diligence. Are there guarantees in place for the products sold? Have you completed an analysis of the market? Do you know who the competition is? Once you and the professionals helping you have determined that your best interests will be served, you can fully enjoy the excitement of buying the perfect business.