This article are provided for information purposes only, and are not intended as legal advice.

What should you consider when buying a business?

January 19th, 2010

Making the decision to go out on your own and buy a business is a huge decision.  What other things should you think about when deciding what type of business should you buy?  Here is a list of items to consider:

  • how much equity do you have?
  • how much debt can you afford to carry?
  • how much debt will a bank lend you?
  • what is your expectation of the salary that you are to receive.  if you are investing $100,000 and hope to get a salary of $100,000 per annum, stop looking for a business because that is not realistic but many people believe that they can do this.
  • how many hours are you willing to work each week?
  • how far is the business from your home, how much time will be spent commuting?
  • do you have kids?  do you need to go home during the day, is that possible with the new business?
  • do you want a fixer upper or do you want a business which is well established, needs little improvement? The former will be cheaper, the later will be a more expensive business to buy.
  • when you find the business, do they have proper accounting records?
  • are their external financial statements prepared by an accredited accountant?
  • what type of opinion did the accountant provide, notice to reader, review engagement or audit?
  • ask for internal financial statements for the current and previous year and compare the two so that you can see the trend in revenue and profits on a month to month basis
  • how many employees do you want?
  • are you a people person?
  • do you have all the skills to operate the business or do you need help?
  • do you need a partner to help with the business?
  • do you have the support of your spouse and your family?
  • do you have a plan of how much you are willing to pay for a business?  you need to determine how you will determine the price you are willing to pay.  Buying a business is based on sound economics and not on emotions.  If you buy on emotions, you may over pay for the business.
  • do you have your support team, lawyer, accountant, banker selected before you start your search?

These are just a few items to consider when buying a  business.

Filed under: Buying a business — Gary Landa @ 9:24 am

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