Deciding to buy a business is an emotional decision. When looking for the right business for sale you have to be both realistic and open. There is no “perfect business” as all businesses have their positives and negatives. There is also no business that is considered a steal at its price. If it appears to be a steal then beware – as there may be something negative lurking beneath the facts and numbers.
Look at the entire business model. Not only should all financial figures be proven through financial statements but the entire business should be open to you for review upon acceptance of confidentiality documents and rules. But there are certain business related items that are not at your disposal. For instance, customer names, supplier names and employee names are not something you should ask for. In addition, you should have no contact, visitation or any other communication with that business without the approval of the business broker or if no broker then the owner.
Some things you should ask for include the complete financial history up to the last 3 years – if owned less than 3 years then adjust these requests accordingly. You should also be given asset values including individual values of equipment and inventory. It is also valuable for you to ask where the increased potential rests in the business. Even though a value can’t be placed on potential, you should look into the business’ potential for one main reason- DEBT SERVICE.
This is what you need to know before making a decision to buy. In this guide we explain the importance of the business model, confidentiality, qualified buyers and reviewing the value on a business and more. We also break down the reasons why you should consider using ProClient Brokers to buy a business.
If you have thought about buying a business then contact us. We will educate you on what it takes to buy a business and what you probably did not know in the buying process.